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

Cleveland: Bullish Reports, Bearish Responses

February 7, 2016

Absence of demand for cotton, among other factors, is sending mixed signals to the market.

Market Analysis

Shurley on Cotton: Prices Still Low, but Find Stability

January 25, 2016

After recently threatening the 60-61 cent range, prices now seem to have found a little support and – dare we say – upward momentum.

Market Analysis

Cleveland: Market Yawns as It Closely Watches China

January 18, 2016

Despite a 2.0 million bale reduction in world production and consumption, the market yawned and moved lower, all while watching for signs of a potential dump of low grade stocks by China.

Market Analysis

Shurley on Cotton: Looking Back at 2015 and Ahead to 2016

January 13, 2016

The New Year has not started off well for cotton. It is concerning, but this recent decline is likely short-term.

OA Cleveland
Market Analysis

Cleveland: Stagnant Prices and Demand Are Frustrating

January 8, 2016

The cotton market continues to take it on the chin, as prices go nowhere and demand for cotton remains low.

don shurley
Market Analysis

Shurley on Cotton: Ending the Year with a Positive Outlook

December 22, 2015

In spite of the challenges in 2015, it’s good to remember that the marketing year is less than half over. There may yet be better opportunities down the road.

OA Cleveland
Market Analysis

Cleveland: Low Demand Maintains Status Quo

December 21, 2015

Despite what should be positive indicators for cotton, the lingering loss of market share has simply stripped demand from the market for now.

Around The Gin
Product News

New FieldView Drive Provides Real Time Field Data Transfer

January 26, 2016

The Climate Corporation is launching FieldView Drive, a device that provides seamless transfer of real time field data and mapping from planting or harvesting equipment to a mobile device.

Product News

PhytoGen Releasing First Enlist Cotton Variety for 2016

January 13, 2016

PhytoGen is releasing PHY 490 W3FE, the first cottonseed variety with the Enlist cotton trait, for the 2016 growing season.

Product News

Enlist Cotton Ready to Launch for 2016

January 6, 2016

Dow AgroSciences announced that cotton growers will have access to the Enlist cotton technology in 2016.

Product News

Bayer Announces New 2016 FiberMax and Stoneville Cotton Varieties

January 5, 2016

Bayer has announced the release of three new FiberMax and Stoneville varieties for 2016, all featuring the company’s GlyTol, LibertyLink and TwinLink technologies.

Product News

Deltapine Announces Class of 16 Varieties

December 14, 2015

Four new Bollgard II XtendFlex cotton varieties make up the recently announced Deltapine Class of 16.

Product News

PhytoGen Varieties Raise Standards for Yield and Quality

November 30, 2015

Growers propelled two PhytoGen brand varieties toward the top of the 2015 USDA Cotton Varieties Planted report.

Product News

2016 Seed Showcase – All-Tex and Dyna-Gro

November 16, 2015

Sister cottonseed companies are working to extend their footprint in 2016.

Product News

2016 Seed Showcase – CROPLAN

November 16, 2015

Up-and-coming CROPLAN relies on careful variety evaluation and placement strategies for growth.

Latest News
Market Analysis

Cleveland: Bullish Reports, Bearish Responses

February 7, 2016

Absence of demand for cotton, among other factors, is sending mixed signals to the market.

Market Analysis

Cleveland: Feeling Bearish and Blue

February 1, 2016

Loss of cotton demand and a looming move of Chinese stocks has even O.A. Cleveland saying, “This hurts.”

Market Analysis

Shurley on Cotton: Prices Still Low, but Find Stability

January 25, 2016

After recently threatening the 60-61 cent range, prices now seem to have found a little support and – dare we say – upward momentum.

Market Analysis

Cleveland: “Stuck in the Mud” Market Remains Tiresome

January 22, 2016

This market is stuck in the mud – looking more like just holding a bottom rather than turning around.

Market Analysis

Cleveland: Market Yawns as It Closely Watches China

January 18, 2016

Despite a 2.0 million bale reduction in world production and consumption, the market yawned and moved lower, all while watching for signs of a potential dump of low grade stocks by China.

Market Analysis

Shurley on Cotton: Looking Back at 2015 and Ahead to 2016

January 13, 2016

The New Year has not started off well for cotton. It is concerning, but this recent decline is likely short-term.

Market Analysis

Cleveland: Stagnant Prices and Demand Are Frustrating

January 8, 2016

The cotton market continues to take it on the chin, as prices go nowhere and demand for cotton remains low.

Market Analysis

Shurley on Cotton: Ending the Year with a Positive Outlook

December 22, 2015

In spite of the challenges in 2015, it’s good to remember that the marketing year is less than half over. There may yet be better opportunities down the road.

Market Analysis

Cleveland: Low Demand Maintains Status Quo

December 21, 2015

Despite what should be positive indicators for cotton, the lingering loss of market share has simply stripped demand from the market for now.

Market Analysis

Shurley on Cotton: Hitting a Wall at 65 Cents

December 14, 2015

The disappointing decline is likely due to some of the bullish energy running out after the nice uptick we’ve experienced recently, plus a not so encouraging export report and the December USDA production and supply/demand numbers.

Market Analysis

Cleveland: Market Rises, Then Slips, Following USDA Report

December 14, 2015

The market slipped a bit last week. But it’s set to crawl higher – backing and filling along the way, but with a positive upward bias.

Market Analysis

Market Showing Bullish Indicators

December 4, 2015

The cotton market is demonstrating signs of life again. The U.S crop will be lower, and improved U.S. exports will hone sharp points on the old bull’s horns.

Market Analysis

Shurley on Cotton: Prices Finding More Support and Momentum

November 30, 2015

Prices are finding increasing support around the 62-cent level. That may not be exciting, but firming up the floor in a very volatile and uncertain market is a good thing.

Market Analysis

Shurley on Cotton: Prices Need Something to Grab Hold Of

November 16, 2015

Cotton prices desperately need something to grab hold of to help build momentum.

Market Analysis

World Production and Carryover Drops, But No Change in Prices

November 13, 2015

The absence of almost anything resembling demand continues to keep cotton prices locked in a near 10-cent trading range.