Cotton Prices Move Higher, But Nearing Point of Likely Market Resistance

The December supply demand report and the weekly export sales report were both void of any surprises this past week, but prices still moved higher.

The March contract closed above 83 cents and is approaching the 84-to-85 cent mark suggested last week as a probable point where price resistance will be too stiff to penetrate. This idea was supported by the export sales report and the technical factor, open interest. Certificated stocks still need to rise, as they have fallen below 60,000 bales with concerns that more decertification is coming. Either way, that amount is not enough.

Thus, the market must find a way to bring more to the board. Hopefully, this week’s move above 83 cents will do that. Nevertheless, I continue to look for the current rally to exhaust itself near the current level.

Both world and U.S. supply demand estimates were little changed from the November report. While totals remained much the same, some of the country-by-country estimates did change. Principally, the Chinese crop was lowered another 500,000 bales, down to 32 million bales – in line with Chinese announcements. USDA did, as it somehow seems to do, increase world carryover a bit.

Weekly U.S. export sales slowed somewhat, ending a seven-week run of more than 200,000 RB bales sold per week. The slowing was not unexpected, as the reporting period corresponded with price activity near or above 79 cents in the March contract after a period of 77-to-78 cent prices.

As stated, the price advance to 83 cents will likely continue to limit sales. Still, net sales of Upland on the week were 174,100 RB and Pima sales were 3,300 RB 0f Pima. To date, total U.S. sales of all cotton have climbed to 7.03 million bales.

Chinese mills continue to shy away from sales from the national reserve with the exception of good quality cotton from Xinjiang and government-owned imported cotton. Their quality crisis continues and, as of yet, has not come home to roost.

The limited availability of good quality in the Chinese reserve continues to strain textile mills by limiting the volume of quality yarns they can produce. Thus, the upstream mills continue to purchase imported yarn from around the world – including the U.S. – at month-on-month and year-on-year record levels. Imported cotton yarn does not carry the stiff penalty associated with imported raw cotton. Thus, world demand remains strong, despite the lower level of yarn production coming from China.

This quality problem will linger and keep a floor under prices. Nevertheless, at least a measurable proportion of the current rally has been associated with short covering by funds and not with any increase in open interest. This is another reason to suggest that the 84-to-85 cent level in the old crop March is top heavy.

Growers may want to consider purchasing puts to cover a portion of new crop production. But, that discussion will wait for another time.

Topics:

Leave a Reply

Market Analysis Stories
Market Analysis

Shurley on Cotton: June Numbers Leave Bulls in the Corral for Now

June 12, 2015

Cotton growers are optimistically waiting for prices to break to the upside. But patience is wearing thin.

Market Analysis

Shurley On Cotton: A New Floor for Planted Acres

July 2, 2015

  By Dr. Don Shurley The long-awaited and much anticipated first estimates of actual crop acres planted for 2015 are

Market Analysis

Will Spring Rains Offer Price Relief in 2015?

July 2, 2015

Will this year’s decline in planted acres offer some price release sometime soon? That’s the question waiting for an answer.

OA Cleveland
Market Analysis

Late Week Fireworks Could Signal Something Bullish for Cotton

June 29, 2015

Round and round and round she goes… Where she stop no one knows. The circus crier could have found employment

Market Analysis

Unchanged Variables Keep Market Moving Nowhere Fast

June 22, 2015

It’s the lull before the storm, and nothing in the cotton market will change until Mother Nature makes her decisions.

Market Analysis

Marking Time Thanks to USDA, China and Mother Nature

June 14, 2015

The cotton market marked time this past week, thanks to USDA, China and Mother Nature.

OA Cleveland
Market Analysis

Cotton Market Poised to Respond to Mother Nature

June 8, 2015

The range bound trading continues for cotton without any change in sight until time passes and Mother Nature does what

Around The Gin
Product News

Ratting Out Copper Theft

June 10, 2015

A simple alarm technology is helping to stop copper thieves who target irrigation systems.

Product News

EPA Approves New Premix for 2016 for Cotton, Soybean Weed Control

May 29, 2015

Cotton and soybean growers will have a new weed control option in 2016 with Warrant Ultra Herbicide, a premix of acetochlor and fomesafen.

Product News

Deltapine NPE Program Begins Eighth Year of On-Farm Variety Evaluation

April 28, 2015

Nearly 200 farmers will be part of the Deltapine New Product Evaluator program this year to help evaluate cotton variety candidates for the Deltapine Class of 16.

Product News

EPA Approves Enlist Duo Herbicide for Use in Additional States

April 2, 2015

The EPA has approved Enlist Duo herbicide for use in nine additional states, including four in the Cotton Belt.

Product News

New 2015 CROPLAN Cotton Varieties Feature Bollgard II XtendFlex Technology

March 19, 2015

WinField is adding Monsanto’s new Bollgard II XtendFlex cotton trait to two new CROPLAN cotton varieties for 2015.

Precision Technology

New Features for TeeJet Aeros 9040 Field Computer

March 18, 2015

TeeJet has added new features to its Aeros 9040 Field Computer for 2015.

Precision Technology

TeeJet Launches New DynaJet Flex Nozzle Control System

March 17, 2015

The new DynaJet Flex 7120 nozzle control system from TeeJet Technologies helps growers manage spray quality across a variety of operating speeds and application rates.

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.

Latest News
Market Analysis

Shurley On Cotton: A New Floor for Planted Acres

July 2, 2015

  By Dr. Don Shurley The long-awaited and much anticipated first estimates of actual crop acres planted for 2015 are

Market Analysis

Will Spring Rains Offer Price Relief in 2015?

July 2, 2015

Will this year’s decline in planted acres offer some price release sometime soon? That’s the question waiting for an answer.

Market Analysis

Late Week Fireworks Could Signal Something Bullish for Cotton

June 29, 2015

Round and round and round she goes… Where she stop no one knows. The circus crier could have found employment

Market Analysis

Unchanged Variables Keep Market Moving Nowhere Fast

June 22, 2015

It’s the lull before the storm, and nothing in the cotton market will change until Mother Nature makes her decisions.

Market Analysis

Marking Time Thanks to USDA, China and Mother Nature

June 14, 2015

The cotton market marked time this past week, thanks to USDA, China and Mother Nature.

Market Analysis

Shurley on Cotton: June Numbers Leave Bulls in the Corral for Now

June 12, 2015

Cotton growers are optimistically waiting for prices to break to the upside. But patience is wearing thin.

Market Analysis

Cotton Market Poised to Respond to Mother Nature

June 8, 2015

The range bound trading continues for cotton without any change in sight until time passes and Mother Nature does what

Market Analysis

Mother Nature Now Controls the Market

June 1, 2015

Mother Nature has taken control of the market, thanks to weather-related acreage losses in the U.S., India and China.

Market Analysis

Shurley on Cotton: Prices Steady, But Tempting Downside Support

May 27, 2015

Amid the volatility and unknowns of the cotton market, this much we know – cotton production in 2015 will require patience, a clear understanding of the risks and careful evaluation of marketing tools and choices.

Market Analysis

Weather Worries Put Cotton Market on the Defensive

May 26, 2015

The cotton market found itself on the defensive this past week, as weather issues in all cotton-producing countries helped drive the dollar higher and prices lower.

Market Analysis

Plexus: Look for Tight, Long-Term Trading Range

May 22, 2015

The market has encountered both strong support and resistance to keep prices confined to narrow trading ranges for both July and December cotton.

Market Analysis

Despite Bearish Reports, Cotton Continues to Hold the Higher Ground

May 16, 2015

The cotton market continues to defy the onslaught of bearish shots across its bow.

Market Analysis

Shurley on Cotton: No Surprises in May USDA Numbers, Sideways Market Continues

May 13, 2015

USDA’s May WASDE report contains the first U.S. and World estimates for the 2015 crop year, and the numbers are about as expected – some better than expected.

Market Analysis

Market Up and Down, But Not Down and Out

May 11, 2015

With some exceptions, cotton prices spent time backing and filling the entire week. Yet the market is still attempting to flex its arms and muscles a bit to the top side.

Market Analysis

Is the Cotton Market Showing Longer Legs?

May 1, 2015

The stars seemed to align for the cotton market this past week, as prices moved to highs not seen in almost nine months.