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
don shurley
Market Analysis

Shurley on Cotton: Prices Slip Under Pressure

August 15, 2016

The sudden jump in cotton prices was recently referred to as “Christmas in July.” Well, the new wears off eventually – even for Christmas gifts.

Market Analysis

Bears Impact Market, But Long Term Still Bullish

August 22, 2016

The near term technical perspective for the cotton market has turned a bit bearish. But, the longer term outlook remains bullish.

Market Analysis

Cleveland: Feed This Hungry Cotton Market Now!

August 1, 2016

The cotton market is hungry and wants to be fed. It’s time for growers to move their price fixations up and sell it some cotton!

Market Analysis

Mother Nature Now in Charge of the Market

July 24, 2016

At this point in the crop production year, be assured that Mother Nature will still have the major say with respect to cotton prices.

Market Analysis

Cleveland: USDA Turns the Bulls Loose

July 18, 2016

Say it again: Technicals are the leading indicator of fundamentals; they kept telling us higher prices were coming.

Market Analysis

Shurley on Cotton: It’s Christmas in July!

July 13, 2016

The calendar says July. But for cotton growers, it may as well be “Merry Christmas.”

Market Analysis

Watching Bulls, Bears and Fundamentals

July 11, 2016

Fundamentals rule in the long run, but technicals provide the roadmap. Just be sure to keep an eye on the bulls and bears.

Around The Gin
Product News

ChemChina/Syngenta Deal Gets U.S. Foreign Investment Approval

August 22, 2016

ChemChina and Syngenta have received a key clearance for the proposed consolidation of the companies.

Product News

Enlist Cotton Trait Earns Full Export Approval

August 10, 2016

Cotton varieties containing Dow AgroSciences’ Enlist trait now have full export approval in key countries.

Product News

Spray Equipment Offer Helps Maximize On-Target Applications

August 3, 2016

A new spray technology equipment offer can help growers participating in Roundup Ready PLUS Crop Management Solutions upgrade their sprayers to maximize on-target applications.

Product News

EPA Allows Sale and Use of Existing Belt Inventory

August 2, 2016

The U.S. EPA’s Environmental Appeals Board has upheld an earlier decision to cancel registration for Bayer's insecticide Belt, but is allowing sales of existing stocks to growers for use.

Product News

Indigo Launches Water Efficiency Product for Cotton

July 26, 2016

Boston-based research firm Indigo has launched its first commercial product – Indigo Cotton – which helps improve the cotton plant’s water use efficiency.

Product News

Enlist Technology Provides Tolerance to Three Key Herbicides

July 13, 2016

The Enlist weed control system will give growers the ability to use three modes of action postemergence in both cotton and soybeans.

Product News

Providing Upland Varieties with Acala-like Quality

July 13, 2016

PhytoGen offers growers several upland cotton varieties with Acala-like fiber quality for added premiums and higher profitability.

Product News

PhytoGen Names Winners in Best Yielder Club Sweepstakes

June 29, 2016

A North Carolina cotton grower was named grand prize winner in the 2016 PhytoGen Best Yielder Club sweepstakes.

Latest News
Market Analysis

Bears Impact Market, But Long Term Still Bullish

August 22, 2016

The near term technical perspective for the cotton market has turned a bit bearish. But, the longer term outlook remains bullish.

Market Analysis

Shurley on Cotton: Prices Slip Under Pressure

August 15, 2016

The sudden jump in cotton prices was recently referred to as “Christmas in July.” Well, the new wears off eventually – even for Christmas gifts.

Market Analysis

Market Holds On in Face of Neutral Report

August 14, 2016

USDA’s August cotton reports were neutral-to-supportive, keeping the 70-78 cent trading range in place as the major trading channel.

Market Analysis

Market Strong, But Looking for Answers on China, India

August 5, 2016

This market has 80 cents written all over it. But it’s also calling for a closer look at reported cotton stocks in China and India.

Market Analysis

Cleveland: Feed This Hungry Cotton Market Now!

August 1, 2016

The cotton market is hungry and wants to be fed. It’s time for growers to move their price fixations up and sell it some cotton!

Market Analysis

Mother Nature Now in Charge of the Market

July 24, 2016

At this point in the crop production year, be assured that Mother Nature will still have the major say with respect to cotton prices.

Market Analysis

Cleveland: USDA Turns the Bulls Loose

July 18, 2016

Say it again: Technicals are the leading indicator of fundamentals; they kept telling us higher prices were coming.

Market Analysis

Shurley on Cotton: It’s Christmas in July!

July 13, 2016

The calendar says July. But for cotton growers, it may as well be “Merry Christmas.”

Market Analysis

Watching Bulls, Bears and Fundamentals

July 11, 2016

Fundamentals rule in the long run, but technicals provide the roadmap. Just be sure to keep an eye on the bulls and bears.

Market Analysis

Cleveland: A Fun Week of Bulls, Bears and Brexit

July 5, 2016

The cotton market experienced a fun, exciting week as trading focused on strong bullish and bearish fundamentals – and little to no impact from Brexit.

Market Analysis

Shurley: Acreage Numbers Could Challenge Range-Bound Prices

July 1, 2016

In light of the June 30 USDA acres planted numbers, it would have to be considered good news if cotton’s “range bound” prices can remain at or above 64 cents.

Market Analysis

Market Fundamentals Positive, but Not Yet Bullish

June 20, 2016

July prices are still bumping into resistance. But there are enough positive fundamentals in the market to provide a bit of bullish hope.

Market Analysis

Shurley on Cotton: Thoughts Ahead of the Acreage Report

June 16, 2016

There’s usually speculation on the June USDA Acreage number and how it might compare to the March Prospective Plantings number. So far, it's all quiet.

Market Analysis

Commodity and Mill Actions Pushing Cotton Higher

June 10, 2016

It was a pretty good week for cotton, as fund money continued to flow to all commodities, and mills began to ease their price expectations higher.

Market Analysis

Mills, Speculators and Weather Driving Cotton Prices

June 7, 2016

Mother Nature’s recent whims are driving new money into cotton, as mills come to grips with rising prices and price fixations, which fuel buying by hedge fund long speculators.