Cotton Market Ready for a Low Price Cure

The cotton market is finally in the mode of curing low prices.

Fifteen of the past 17 trading sessions have been in the red, as the month-long decline moves into its second month. The only real cure for low prices is low prices. And while prices remained under pressure all week, the downtrend was near flat this week.

As suggested, the 65 to 66 cent doorstep is but a moment away. But for now, the 67 to 68 cent level is providing support. Possibly, that level will hold the price deterioration, but at least the bloodletting has ended, and downside risk is very limited.

The ICE New York contract has fallen to the level that U.S. and other cottons are very price competitive at the Chinese mill door. Too, at the current price level, U.S. and some other qualities are highly desired by the Chinese mills. Thus, with New York futures prices in the mid 60’s, U.S. export sales will continue to see a significant boost.

Crop conditions across the U.S. continue to improve as the U.S. crop plays catch up. This year’s crop progress has been behind average, but has all but caught up and is no longer considered to be a negative on yields. The full potential of the crop remains in front of it, and USDA’s August world supply report will provide the first objective yield estimate of the 2014 crop.

The current crop estimate is 16.5 million bales. However, since that estimate was made, the weather has generally been ideal across the Belt. The crop potential is likely 750,000 to 1.0 million bales more than that, but Texas weather will remain crucial.

USDA enumerators will be in cotton fields the last several days in July and the first few days in August assessing crop conditions. Thus, the August crop report and the August supply demand report will be based on conditions as of August 1, 2014. The results will be released by USDA on August 12 – still three weeks away.

The month-long drop in prices has also brought out international mills. Mills had been slow to take up cotton for the out months until last week and have continued to rev up their action.

Merchant sources suggest that mills were active buyers again this week. The latest weekly export sales report for Upland included net sales of 20,900 RB for immediate delivery and 342,800 RB for 2014-15 marketing year delivery. An additional net 500 RB of Pima were sold across both marketing years.

Turkey, Vietnam, China and Mexico were the primary buyers and represent two-thirds of the most active markets for U.S. cotton. However, sales were made to 19 countries – a sign of both widespread demand and mills’ willingness to commit to long term delivery contracts. This was the most active the export market has been since early May.

Last week’s comments focused somewhat on the Indian monsoon situation. Since then, the monsoon has blessed the drought-parched Indian northern cotton area, and crop conditions have improved and planting has restarted. Much will depend on the strength of the monsoon and its length. The crop has lost some yield potential, but a disaster has been averted.

In the absence of unexpected news, the market will be slow to recoup losses. We should not be surprised to see a challenge of the 70 to 72 cent level in December. But likewise, a 66-cent trade should not come as a surprise.

Topics: ,

Leave a Reply

Market Analysis Stories
Market Analysis

Quality Continues to Drive Cotton’s “Joyful Ride”

February 21, 2015

Cotton’s joyful ride continues, as prices have pressed the 65 cent level, driven by demand for quality machine harvested cotton.

Market Analysis

Plexus: Time for the Market to Rest and Regroup?

February 20, 2015

Look for the market pull back a bit and regroup over the coming weeks. But don’t worry. It’s just taking a breather.

Market Analysis

Plexus: Buying Pressure Should Keep Cotton Moving Up

February 18, 2015

Buying pressure over the coming months should help maintain the current upward move for cotton.

Market Analysis

Plexus: Market in Perfect Shape for a Short Squeeze

February 10, 2015

Since starting to move higher, the March contract has gained more than 450 points and has moved through some key resistance levels. Buyers are now firmly in control of the market.

OA Cleveland
Market Analysis

Market is Scrambling for Quality Cotton

February 7, 2015

The market is plowing new territory each week as mills search for quality cotton. And they’re starting to get desperate.

Market Analysis

Plexus: Market Maneuvering Into an “Interesting Position”

February 3, 2015

Continued strong demand for U.S. cotton has lifted the futures market to a two-week high, helping to maneuver the market into an interesting position.

Market Analysis

Will the U.S. Sell Out of Cotton?

February 2, 2015

World consumption is trending up, and the market is suggesting that the U.S. will “sell out” of cotton this year if prices do not increase.

Around The Gin
Product News

New Cheminova Chemistry to Help Control Herbicide Resistant Weeds

February 23, 2015

Cheminova plans to register pethoxamid, a new herbicide active ingredient, to help growers manage herbicide-resistant weeds.

Product News

Brake Herbicide Receives Section 18 Approvals in Six States

February 18, 2015

Brake Herbicide has received Section 18 emergency use exemptions for control of glyphosate-resistant Palmer amaranth in six cotton producing states.

Precision Technology

TeeJet Matrix 430 Provides Simple, Easy-to-Use Guidance

February 18, 2015

TeeJet Technologies’ new Matrix 430 GNSS guidance system is ideal for a wide range of field applications.

Precision Technology

TeeJet Launches RX520 High-Precision GNSS Receiver

February 17, 2015

TeeJet Technologies has introduced the RX520 dual frequency GNSS receiver for precision farming operations.

Disease Control / Nematodes

Velum Total Approved for Cotton, Peanuts in 2015

February 12, 2015

Bayer CropScience has received registration for Velum Total, a new insecticide/nematicide for use in cotton and peanuts in 2015.

Disease Control / Nematodes

EPA Approves TOPGUARD Terra for Cotton Root Rot Control

February 6, 2015

TOPGUARD Terra fungicide from Cheminova has received EPA registration for control of cotton root rot.

Product News

Deltapine to Release Five Bollgard II XtendFlex Cotton Varieties

January 27, 2015

Following USDA deregulation of the Bollgard II XtendFlex cotton technology, Deltapine has announced plans to offer five new B2XF varieties for the 2015 season.

Product News

Bollgard II XtendFlex Cotton Poised for Limited Introduction

January 21, 2015

A limited introduction of Bollgard II XtendFlex cotton varieties is planned for the 2015 planting season through Deltapine and select licensees.

Latest News
Market Analysis

Quality Continues to Drive Cotton’s “Joyful Ride”

February 21, 2015

Cotton’s joyful ride continues, as prices have pressed the 65 cent level, driven by demand for quality machine harvested cotton.

Market Analysis

Plexus: Time for the Market to Rest and Regroup?

February 20, 2015

Look for the market pull back a bit and regroup over the coming weeks. But don’t worry. It’s just taking a breather.

Market Analysis

Plexus: Buying Pressure Should Keep Cotton Moving Up

February 18, 2015

Buying pressure over the coming months should help maintain the current upward move for cotton.

Market Analysis

Market Faces Long and Crooked Row to Higher Prices

February 17, 2015

The market has a very long and crooked row to hoe on its path to higher prices. However, it is sending multiple signals that the 57 cent resistance level did hold, and prices can now begin to ease higher.

Market Analysis

Shurley on Cotton: Upward Progress Finally Being Made

February 11, 2015

Prices should be nearer the bottom end of their likely range. If you’re going to plant cotton in 2015, be patient and wait for possible rallies this summer.

Market Analysis

Plexus: Market in Perfect Shape for a Short Squeeze

February 10, 2015

Since starting to move higher, the March contract has gained more than 450 points and has moved through some key resistance levels. Buyers are now firmly in control of the market.

Market Analysis

Market is Scrambling for Quality Cotton

February 7, 2015

The market is plowing new territory each week as mills search for quality cotton. And they’re starting to get desperate.

Market Analysis

Plexus: Market Maneuvering Into an “Interesting Position”

February 3, 2015

Continued strong demand for U.S. cotton has lifted the futures market to a two-week high, helping to maneuver the market into an interesting position.

Market Analysis

Will the U.S. Sell Out of Cotton?

February 2, 2015

World consumption is trending up, and the market is suggesting that the U.S. will “sell out” of cotton this year if prices do not increase.

Market Analysis

Shurley on Cotton: Prices Struggle as New Round of Weakness Sets In

January 26, 2015

For the fourth time since last spring, prices have again failed to hold support as new negative forces overtake the market. The decline in prices is concerning, but is offset somewhat by a strong basis and premiums for quality and an increasing LDP/MLG.

Market Analysis

Market Struggles with Black Swans and Bears

January 26, 2015

Although the bears have finally pulled prices into the 50s, the ability of old crop cotton to hold near the 60 cent level is phenomenal, given the current “Black Swan” financial market.

Market Analysis

Plexus: Get Ready for a Few Weeks of Volatility

January 23, 2015

While the market situation for U.S. cotton may seem friendly, it is being overshadowed by the negative outlook for commodities stemming from a strong dollar, lower economic growth and fears of another financial meltdown.

Market Analysis

Bears Are Growling, but Market Holds Firm

January 19, 2015

The fifty-centers are still out there and are beginning to beat their drums louder and louder, but the current trading range has proven to be most resilient.

Market Analysis

Plexus: Price Reacting to Non-Cotton Issues

January 16, 2015

Negative vibes from outside markets are overshadowing fairly constructive developments on the cotton front.

Market Analysis

Shurley on Cotton: Prices Just Treading Water

January 13, 2015

Recent activity has simply solidified the sideways pattern this market has been in for quite a while.