Cotton Market Surprisingly Calm, All Eyes on the Weather

May 16 marked the fifth consecutive day of lower closes for the New York ICE old crop and new crop cotton futures. Yet, the true surprise was the absence of any price volatility during the week.

During a period when every analyst and their respective brothers-in-law predicted extreme volatility, the market was calm. In fact, trading typically was within single and double digits – all but unheard of for the past several years.

Possibly, this truly is the dark before the dawn.

Too, the market offered scant new fundamental news. Yes, U.S. export sales – the largest exporter of cotton to the world market – were a downer this week, but A) cancellations were nil, and B) it is still cold/wet/windy in China as well as cold/wet in the Southeast and Midsouth. With respect to production volume, it is only dryer on the Texas Plains. Thus, fundamentals remain positive.

Additionally, it was thought that textile mills had been active in fixing the price of their on-call sales, but this proved to be incorrect as demonstrated by exchange reports. Thus, those call sales continue as a firm base of support for the market.

The old crop slide to just below 90 cents this week is now testing the patience of the bulls, and rightfully so. Prices have reached near the very bottom of the range that must hold if the speculative funds are to remain on the long side of the market. Were they to exit in mass, the July futures could now slip to near 86 cents.

However, the trading range remains in play. Until July falls below 87 to 88 cents, the dominant trading range will continue to be in the 92 to 95 cent area, with an expanded range of 87 to 100 cents.

As commended the past several weeks, cotton demand does not support a price above 94 to 95 cents. Yet, with the significantly large volume of unfixed on-call mill sales and the extremely large quantity of speculative fund longs in the July contract, another run at 95 cents remains a strong possibility. Nevertheless, the tug-of-war will continue.

As mentioned last week, USDA’s bold and unusual significant reduction in its projection for the 2014 crop took a bit of uncertainty out of the market. That is, the large group of speculative traders that had been positioning themselves for a weather-related bull market based on the Texas drought were put on notice that the move above 82 cents in the December contract signaled that the market now “expected” a considerable decline in U.S. production due to the drought. (And don’t forget about the California drought. Yes, the acreage is small. But that is four bales per acre-plus land that is lost to cotton.)

It will be necessary for the “severe drought” to continue if December is to hurdle the 85-cent mark.

There remains plenty of time to get the Mid-South and Southeast crop in, but weather delays are considerably more than normal. Nighttime temperatures have consistently been in the high 40’s and very low 50’s – far too low for cotton planting. This will have to change immediately, or there will be “real” yield loss. The Texas Plains has its bet shot at moisture in six months within the next week as the 10-day forecast predicts rain next weekend.

Topics:

Leave a Reply

Market Analysis Stories
Market Analysis

Little Price Movement as Market Watches Planting, China

May 2, 2016

There was scarce cotton news the market found interesting in the past week. Now, all eyes are on Mother Nature and the Chinese cotton auction for price direction.

Market Analysis

Cleveland: Chinese Program Providing Market Stability, Price Boost

April 25, 2016

Cotton prices continue to advance, thanks to stability from an unlikely source – China.

Market Analysis

Prices Tick Upward as Demand Debate Continues

April 11, 2016

Cotton prices moved higher in New York at week’s end. But all O.A. Cleveland heard about were his comments on Adidas and demand. So naturally, there’s more.

Market Analysis

Shurley on Cotton: Trying to Decipher the Numbers

April 4, 2016

Spending a little time discussing acres planted is fine for now. But it will all come down to how the weather impacts planted acres, and what happens during the growing season.

OA Cleveland
Market Analysis

Of Demand, Adidas and Planting Intentions

April 4, 2016

The market wants to make a major move. USDA says cotton acres will be will up. Yet demand remains the only game in town – everything else is window dressing.

Market Analysis

Riding Out Cotton’s Flooded Market

April 2, 2016

Joe Nicosia says better days are coming. But American cotton must persevere as China finally unloads its massive reserves.

Market Analysis

Cleveland: All Eyes on USDA Planting Intentions

March 28, 2016

As prices remain unchanged and China remains quiet, the cotton market awaits the USDA planting intentions report for possible good news.

Around The Gin
Product News

Record Yields Set by 2015 FiberMax One Ton Club

May 4, 2016

The 127 members who qualified for the FiberMax One Ton Club pushed cotton yields and quality to higher levels in 2015.

Product News

Meister Media Worldwide Website Relaunches With New Resources

April 22, 2016

Meister Media Worldwide — publisher of Cotton Grower magazine – has relaunched its corporate website, highlighting information and services available from one of agriculture’s leading media companies.

Product News

ReinCloud Promises Remote Control

April 18, 2016

New software set to combine irrigation management and data collection – all in the palm of your hand.

Product News

Search Begins for Deltapine Class of 17

April 14, 2016

Deltapine’s NPE program is nine years old, and the search for the company’s Class of 17 cotton varieties is underway.

Product News

Texas Farmer First to Plant Enlist Cotton Variety

April 11, 2016

Dean Hansen of El Campo, TX, was the first cotton grower in North America to plant the first commercially-available cottonseed with the Enlist cotton trait.

Product News

New Options for Roundup Ready PLUS Program

March 25, 2016

The Roundup Ready PLUS Crop Management Solutions program for 2016 includes a new tool for weed management and new incentives for farmers looking to fight insect pests in corn.

Product News

Greenleaf Launches easyFlow Closed Transfer System

March 24, 2016

Greenleaf Technologies has launched the company’s new easyFlow closed transfer system for the North American market.

Product News

AgLogic Launches Aldicarb Product in Georgia

March 15, 2016

Growers in Georgia will be able to use a new aldicarb pesticide in 2016 for nematode and early season pest control.

Latest News
Market Analysis

Little Price Movement as Market Watches Planting, China

May 2, 2016

There was scarce cotton news the market found interesting in the past week. Now, all eyes are on Mother Nature and the Chinese cotton auction for price direction.

Market Analysis

Cleveland: Chinese Program Providing Market Stability, Price Boost

April 25, 2016

Cotton prices continue to advance, thanks to stability from an unlikely source – China.

Market Analysis

Shurley on Cotton: Recent Events and Market Direction

April 22, 2016

Although it’s a painful time for cotton right now, there are potential positive factors on the horizon that could eventually lead to better prices.

Market Analysis

Bulls and Bears Collide in Eventful Market Week

April 18, 2016

An exciting, bullish week for cotton prices turned bearish, as prices ran ahead of demand, the Chinese announced reserve sale plans, and USDA released its April WASDE report.

Market Analysis

Prices Tick Upward as Demand Debate Continues

April 11, 2016

Cotton prices moved higher in New York at week’s end. But all O.A. Cleveland heard about were his comments on Adidas and demand. So naturally, there’s more.

Market Analysis

Shurley on Cotton: Trying to Decipher the Numbers

April 4, 2016

Spending a little time discussing acres planted is fine for now. But it will all come down to how the weather impacts planted acres, and what happens during the growing season.

Market Analysis

Of Demand, Adidas and Planting Intentions

April 4, 2016

The market wants to make a major move. USDA says cotton acres will be will up. Yet demand remains the only game in town – everything else is window dressing.

Market Analysis

Riding Out Cotton’s Flooded Market

April 2, 2016

Joe Nicosia says better days are coming. But American cotton must persevere as China finally unloads its massive reserves.

Market Analysis

Cleveland: All Eyes on USDA Planting Intentions

March 28, 2016

As prices remain unchanged and China remains quiet, the cotton market awaits the USDA planting intentions report for possible good news.

Market Analysis

China Still Sits Heavy on the Market

March 21, 2016

Chinese reserve stocks still sit as a heavy hat on cotton prices, providing little reason to break above the 59-cent price resistance.

Market Analysis

Cleveland: Quality Premiums Are Coming

March 13, 2016

The quality premium for U.S. cotton has been holding steady, but improvement is on the horizon. Hold for it.

Market Analysis

Cleveland: No Moral Victories in the Market

March 7, 2016

The cotton market is famous for giving second chances, but it also takes no prisoners. We are not talking horseshoes here.

Market Analysis

Shurley on Cotton: Prices “Lost In Space”

March 7, 2016

Much like the space family in the popular 1960s TV show “Lost in Space,” cotton, too, has been under a “meteor shower” of negative news and overall bearish market sentiment.

Market Analysis

Cotton Prices Appear Range-Bound in Near Term

February 23, 2016

Cotton prices are projected to remain range-bound in the near term due to large stocks held by China and depressed prices for all agricultural commodities.

Market Analysis

Market Still Bearish, as Prices Tick Upward

February 22, 2016

The New York March contract settled one tick above 60 cents, helping avoid the deep bearishness, but keeping technical signals weak.