Market Yawns as Trading Interest, Demand Continue to Build

Old crop prices slipped some 200 points on the week, and the new crop December contract settled marginally higher. Thus, the market was a wash during the week despite trading through triple digits most days.

Open interest continues to build, U.S. export sales picked up despite the implications read in USDA’s May supply demand report, and Mother Nature continues to be far from agreeable with her weather blessing on the world 2014 crop. These bullish price indicators, coupled with this week’s lower price for old crop, appeared to uncover more and more immediate demand, as a number of mills have yet to cover their second quarter needs.

Chinese mills report that the demand for yarns produced from 100 percent U.S. cotton has increased. This is an indication of the increasing demand from global markets for quality fabrics. Too, the July unfixed call sales continue as the primary near term fundamental supporting the market. Thus, price activity should remain unchanged into the last week of May and the first week of June. The old crop July contract faces a trading range between 90 and 100 cents, with December’s range holding between 82 and 88 cents.

The market gave little more than a light yawn with the release of USDA’s May supply demand report. Little fresh fundamental news was provided. With few exceptions, it was all fast balls down the middle of the plate. That is, with just three months remaining in the 2013-14 marketing season, the estimates for supply and demand were little changed from the prior month. The mild surprises were the reduction in 2013-14 U.S. exports by 300,000 bales – now estimated at 10.4 million bales – and another slight increase in world ending stocks.

With respect to exports, as previously commented, several markets have yet to conclude their second quarter business. Thus, both export sales and shipments should improve.

Yet, do not be surprised that it comes to pass that the report should have been considered bullish for several reasons relating to the supply side of the price equation. USDA’s projection of the 2014 crop was 14.7 million bales – nearly two million above the 2013 crop, but well below the expectations of most and the lowest of all projections.

Comment: Do not be surprised if the 2014 U.S. crop drops closer to 14 million bales. USDA is projecting nearly a 3.0 million bale world production increase in 2014 over the 2013 production. Yet, with planting delays and global weather difficulties being the major culprits, 2014 production will be under the gun to even meet 2013’s 117 million bale production. Further, USDA now projects that world carryover will make its fourth consecutive record increasing, moving up to 102 million bales by August 1, 2015.

With demand finally improving in Western Europe and China’s intent to continue importing raw cotton (albeit less than in the prior three years, but well better than USDA’s estimate of a one third reduction), world cotton demand should continue to support prices near or above the current level. The sad news, according to long range weather historians, is that the current Texas drought has, by some estimates, recorded the most severe conditions in over 100 years. That suggests the ongoing drought could last another two to three years.

That should do it! Now that an economist has predicted the drought to last another three years, rain should immediately begin to pour.

Topics: ,

Leave a Reply

Market Analysis Stories

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.

Market Analysis

Plexus: Spec Movement Reveals Downside of Sideways Market

November 17, 2014

The recent trading action that pushed cotton prices into the 50s is linked to the interplay of spec short covering and spec long liquidation, which should keep the market in its current sideways trend.

Market Analysis

Prices Still on the Path to Nowhere

November 7, 2014

Cotton prices continued their path to nowhere and are expected to continue the same back and forth trading action, reinforcing the thought that the market has bottomed out.

Market Analysis

Prices Hint That the Market Bottom Is In

November 3, 2014

Goblins may continue to haunt the cotton market past the Halloween holidays. But the market is giving more signals that the bottom is in.

Market Analysis

With WTO Brazil Settled, Cotton Casts a Wary Eye on Chinese Policy

October 31, 2014

With the conclusion of the WTO Brazil case, the U.S. cotton industry can bring a renewed focus to the challenges ahead, coming from a familiar source.

Market Analysis

Shurley on Cotton: Lackluster Week Closes on a High Note

October 27, 2014

An end of week uptick closed the market up 81 points from the previous week. But the longer-term direction is still sideways, with a range of mostly 62 to 67 cents.

Market Analysis

Same Song, Same Tune – Market Sings the Low-to-Mid 60s Blues

October 24, 2014

The same record that has been spinning for weeks is still playing. The 61 to 62 cent price resistance holds firm, attempts to close above 65 cents continue to be thwarted, and the potential for a short covering rally lingers strong in the background.

Around The Gin

Product News

Americot Adds Another High Yielder for 2015

November 24, 2014

Americot rode to success on the performance of two top varieties in 2014. For 2015, the company is adding another workhorse variety to the stable.

Product News

CROPLAN a Brand to Watch for 2015

November 21, 2014

Growers familiar with CROPLAN corn and soybean varieties in the South may want to keep an eye on the company’s cotton program, too.

Product News

Deltapine Focused on Raising the Yield Bar in 2015

November 17, 2014

No brand of cotton seed was planted on more acres in 2014 than Deltapine. So it stands to reason that the company’s variety researchers are preparing to introduce monumental changes to their seed lineup in 2015.

Product News

Growth Continues for Dyna-Gro and All-Tex

November 13, 2014

Crop Production Services has put a two brand approach in place for its Dyna-Gro and All-Tex brands of cotton. And their varieties are getting stronger each year.

Product News

PhytoGen Gaining Foothold in West Texas Market

November 12, 2014

In a year that saw PhytoGen introduce several new varieties to the Cotton Belt, an old standard once again stole the headlines as the company looks to gain more of the Southwest market.

Product News

Monsanto, Sumitomo and Valent Extend Crop Protection Partnership

November 10, 2014

Monsanto, Sumitomo Chemical and Valent U.S.A. have agreed to extend their strategic partnership in Monsanto’s Roundup Ready PLUS Crop Management Solutions platform for U.S. cotton and soybeans.

Product News

Grow Ag Leaders Scholarship Program Includes Cotton Belt States

October 28, 2014

Grow Ag Leaders is offering more than $500,000 in college scholarships to students interested in agricultural careers. The program is available in 40 states, including many throughout the Cotton Belt.

Product News

Platform Specialty Products to Acquire Arysta LifeScience as Component for New Company

October 21, 2014

Platform Specialty Products has reached a definitive agreement to acquire Arysta LifeScience for approximately $3.51 billion.

Latest News

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.

Market Analysis

I Mean It This Time. The Bottom Is In.

November 24, 2014

I said it at 61/62 cents, so I’d best say it for 57 cents. The bottom is in.

Market Analysis

Plexus: Spec Movement Reveals Downside of Sideways Market

November 17, 2014

The recent trading action that pushed cotton prices into the 50s is linked to the interplay of spec short covering and spec long liquidation, which should keep the market in its current sideways trend.

Market Analysis

Shurley on Cotton: November Numbers Mostly Neutral, Prices Hold

November 11, 2014

USDA’s November crop production and supply/demand numbers are little changed from the October numbers.

Market Analysis

Prices Still on the Path to Nowhere

November 7, 2014

Cotton prices continued their path to nowhere and are expected to continue the same back and forth trading action, reinforcing the thought that the market has bottomed out.

Market Analysis

Prices Hint That the Market Bottom Is In

November 3, 2014

Goblins may continue to haunt the cotton market past the Halloween holidays. But the market is giving more signals that the bottom is in.

Market Analysis

With WTO Brazil Settled, Cotton Casts a Wary Eye on Chinese Policy

October 31, 2014

With the conclusion of the WTO Brazil case, the U.S. cotton industry can bring a renewed focus to the challenges ahead, coming from a familiar source.

Market Analysis

Shurley on Cotton: Lackluster Week Closes on a High Note

October 27, 2014

An end of week uptick closed the market up 81 points from the previous week. But the longer-term direction is still sideways, with a range of mostly 62 to 67 cents.

Market Analysis

Same Song, Same Tune – Market Sings the Low-to-Mid 60s Blues

October 24, 2014

The same record that has been spinning for weeks is still playing. The 61 to 62 cent price resistance holds firm, attempts to close above 65 cents continue to be thwarted, and the potential for a short covering rally lingers strong in the background.

Market Analysis

Plexus: Market “Boxed In” Between Support and Resistance

October 24, 2014

Volatility dropped this week, as the market is discounting a scenario in which prices are not expected to change significantly over the coming months. Once all harvest is complete and sorted out, we may see renewed pressure on cash prices.

Market Analysis

Sleepy Market Hiding Potential Volatility

October 20, 2014

Cotton trading remains locked in a rather wide ten cent trading channel, but actively trading only a four cent band around 63 cents – 61 to 65 cents, that is. In other words, maybe we are being lulled to sleep.

Market Analysis

Plexus: Market on Firm Footing Through Harvest

October 17, 2014

December prices should remain on firm footing until the bulk of the U.S. crop has been harvested and the quality is known. But the massive global inventory probably means a sideways-to-lower market going forward.

Market Analysis

Demand for Quality Cotton Keeps Market Positive

October 11, 2014

The market spent most of the week in positive territory, as its ability to close higher continues to voice the immediate need for quality cotton.

Market Analysis

Shurley on Cotton: Fragile Market Shows Improvement, Outlook Still Cautious

October 11, 2014

After recently falling to the 61-cent level, prices have made a modest, but still welcomed, recovery.

Market Analysis

Chinese Government Now a Marketplace Fundamental

October 6, 2014

The more things change, the more they stay the same. But through their recent actions, the primary fundamental in the marketplace has now become the Chinese government.