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

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

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.

Around The Gin
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.

Product News

Monsanto Donates Research Center to Local Foundation

June 27, 2016

Monsanto Company has donated its 150-acre Leland Agronomy Center to The B.F. Smith Foundation, a nonprofit organization in the Mississippi Delta.

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.

Latest News
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.

Market Analysis

Shurley on Cotton: A Watchful Summer Lies Ahead

June 7, 2016

As planting season ends and summer approaches, the challenge for growers will be if, and when, to take price protection – and, if so, how to do it.

Market Analysis

Strange Mix of Positive Signs for the Market

May 31, 2016

Speculative funds, issues in India, U.S. plantings and strong sales have put the cotton market in a positive mood.

Market Analysis

Planting Progress, China’s Reserve Auctions Driving Market

May 23, 2016

Cotton futures had a few triple digit days this past week. Yet, thanks to a combination of influences, the bulls carried the week – if only slightly.

Market Analysis

Shurley on Cotton: Prices Get a Much Needed Bounce

May 19, 2016

April was a good month for cotton prices. So far, May hasn’t been, but prices seem to be attempting a slight recovery.

Market Analysis

USDA Report Shifts Numbers, Pressures Prices

May 16, 2016

USDA’s May supply demand report brought pressure to the cotton market and moved prices slightly lower to the critical 60-61 cent support level.