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

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

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

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.

Market Analysis

Cotton Holds Its Own Amid Call for Lower Prices

January 11, 2015

Despite spending the week in positive territory, the market was thinly traded, but closed slightly higher and withstood the increasing value of the U.S. dollar. That’s a win for cotton, as it held its own despite a widespread call for lower prices.

Market Analysis

Plexus: Price Drop Pushes Market Back Into Sideways Mode

January 5, 2015

Recent price drops erased all gains from the previous nine sessions in one fell swoop, moving the market back into the 58-61 cents sideways range from which it tried to escape.

Market Analysis

Shurley on Cotton: Looking Back and Looking Ahead

December 24, 2014

It’s not news that 2014 turned out to be a disappointing year for many growers. I’m somewhat optimistic on the price outlook for 2015, but I don’t see much reason to start contracting for anything yet.

Around The Gin
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.

Product News

USDA Deregulates Dicamba-Tolerant Technologies for Cotton and Soybeans

January 16, 2015

The USDA has announced its decision to deregulate Bollgard II XtendFlex cotton and Roundup Ready 2 Xtend soybeans – Monsanto’s dicamba-tolerant trait technologies for those crops.

Product News

Bayer CropScience Anticipates Registration for New Cotton and Peanut Insecticide

January 15, 2015

Bayer CropScience anticipates the registration of Velum Total, the company’s newest insecticide/nematicide, for the 2015 cotton and peanut season in the Southeast.

Product News

New FiberMax and Stoneville Varieties for 2015 Feature GLT Technology

January 14, 2015

Bayer CropScience has announced four new FiberMax and Stoneville cotton varieties for the 2015 season.

Product News

PhytoGen Introduces 2015 Cotton Varieties

January 13, 2015

PhytoGen’s cottonseed portfolio for 2015 includes proven high yielding varieties, as well as new varieties featuring advanced insect, nematode and disease technologies.

Product News

Monsanto and FMC Renew and Broaden Crop Protection Agreement

January 8, 2015

Monsanto and FMC have agreed to extend and broaden their current relationship to help benefit cotton, corn and soybean growers through Roundup Ready PLUS Crop Management Solutions.

Product News

Deltapine Announces Class of 15 Cotton Varieties

December 16, 2014

Deltapine has announced two new high-yielding cotton varieties for its Class of 15, with several potential varieties awaiting regulatory approvals of the Bollgard II XtendFlex technologies.

Latest News
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.

Market Analysis

Cotton Holds Its Own Amid Call for Lower Prices

January 11, 2015

Despite spending the week in positive territory, the market was thinly traded, but closed slightly higher and withstood the increasing value of the U.S. dollar. That’s a win for cotton, as it held its own despite a widespread call for lower prices.

Market Analysis

Plexus: Price Drop Pushes Market Back Into Sideways Mode

January 5, 2015

Recent price drops erased all gains from the previous nine sessions in one fell swoop, moving the market back into the 58-61 cents sideways range from which it tried to escape.

Market Analysis

Shurley on Cotton: Looking Back and Looking Ahead

December 24, 2014

It’s not news that 2014 turned out to be a disappointing year for many growers. I’m somewhat optimistic on the price outlook for 2015, but I don’t see much reason to start contracting for anything yet.

Market Analysis

Current Market Level Holding Its Ground

December 19, 2014

The market’s ability to hold its current level has overshadowed the fact that cash prices around the world have firmed a bit, signaling a stronger basis position for most growths.

Market Analysis

Plexus: Slight Upward Bias in a Sideways Market

December 19, 2014

The market appears to be holding in a sideways to slightly higher range between 59 and 63 cents. But don’t rule out spikes to higher levels on spec short covering.

Market Analysis

Market Bumps Up on News of Smaller U.S. Crop Numbers

December 15, 2014

USDA’s lower projections for U.S. cotton production should strengthen the current global demand shift in favor of U.S. cotton. The implication is a relative higher price.

Market Analysis

Cotton Market is Ripe for a Rally

December 5, 2014

Current price consolidation activity has helped uncover excellent demand. A short covering rally could possibly be triggered sooner than later.

Market Analysis

Plexus: Market Showing Signs of Life

December 5, 2014

After closing the previous 14 sessions in a very tight price band, March cotton started to break out to the upside, boosted by a firmer cash market and possible spec buying.

Market Analysis

Shurley on Cotton: New Round of Weakness Sets In

November 25, 2014

Merchants are now pricing cotton basis the March 2015 futures contract. But March futures – and all prices – are showing a new round of weakness.