facebook_pixel

Old Crop Prices Remain Volatile; Weather Holds the Key for New Crop

The New York spot contract scared the 52-week high of 93.75 cents in last Friday’s trading, as May futures traded to 93.60 cents in the morning session. While demand at 90 cents remains reasonably consistent, it is the large volume of unfixed mill call sales that underlie market strength.

I stated some time ago that mills were in position to get burned, and the fire is only coming closer. They have just over two weeks left in fixation trading on the May contract, and then only some seven/eight weeks of trading on the July. Additionally, while mills have had the ability to roll positions forward, they essentially must fix all contracts by early June. Thus, this will be their last time with the option of rolling contracts to a forward month, and the fire is already burning some of them.

The market is looking to move above 94 cents, then jump to 96 cents, and possibly 98 cents. Yet, I would not hold my breath looking for 98 cents. Do that, and one is likely to awaken choking on 86 cent cotton. As to how much the new crop December might tag along with the May contract, my guess would be no more than 80.50-81.00 cents. The new crop will be led by weather developments, not old crop prices.

Others suggest it is the Chinese policy that holds the answer for the December contract. While the Chinese will likely attempt to discharge an inordinate amount of low quality cotton, that action should not act as any significant drag on market prices.

I am fully of the opinion that weather holds all the aces and face cards to determine the price level of the December contract. In the absence of very timely rains throughout Texas during the spring and summer – particularly in the High Plains and Rolling Plains – then the December contract will move higher. However, for now that remains a weather play. There is an increasing belief that the new crop December is undervalued at 80 cents, and it may be. However, only Mother Nature’s moisture – or lack thereof – holds the key.

As futures have moved higher, so has open interest – an indication that speculative money is coming in on the long side of the market. This will likely continue to push the market higher. Yet, be prepared to see a sharp selloff. I am very much of the opinion it will occur within the next five to six weeks. The real question – and the one I cannot answer – is “Will the selloff occur at 96-98 cents and drop to 86-88 cents, or will it come at 94-95 cents and drop to that same 86-88 cents?” That is, once the bulk of the mills fixations are in, the speculative funds will then take their profits, and the market will drop like a lead balloon.

Net export sales during the 90 cent week totaled 50,800 RB of Upland for current year delivery, 4,000 RB of Pima and 135,900 RB of Upland for 2014-15 delivery. Weekly shipments were a very strong 345,000 RB (329,000 RB Upland and 16,000 Pima). With spring now officially in the air, weekly shipments should continue to average above 300,000 RB. Total commitments at 91 percent of the USDA export estimate of 10.7 million bales are in line with the historical average of 93 percent for this time of year.

Higher prices are in the air for old crop, but be prepared for a very volatile market. New crop has a very, very heavy 80-82 cent cap on its head, at least until later in the spring.

Topics:

Leave a Reply

Market Analysis Stories
Market Analysis

With Market Oversold, Is Bullish Return Near?

July 14, 2017

The cotton invert continues, as both the U.S. and Australian crops are oversold.

Market Analysis

Rain in India, U.S. Keeps Pressure on Prices

July 7, 2017

Beneficial rains in the U.S. and India kept pressure on cotton prices, as the December futures contract settled the past week unchanged.

Market Analysis

Bulls Push Market on Heels of USDA Planting Report

July 5, 2017

Smaller than expected U.S. cotton plantings – and the potential smaller crop – caught the bulls’ attention in the market.

Market Analysis

Market Catching Its Breath After 10-Day Slide

June 23, 2017

After an unprecedented 10-day drop in prices, the market is trying to catch its breath.

Market Analysis

Mother Nature, Not Bulls, Managing the Market

June 16, 2017

Cotton prices took a big hit, and bullish signals are hard to find. Mother Nature is now in charge.

Market Analysis

Shurley: June Report Sends Mixed Signals

June 15, 2017

USDA’s June WASDE report contained some good news and some bad news. Overall, Dr. Don Shurley considers the report somewhat bearish.

Market Analysis

Report Softens Prices, Consumption Concerns Rise

June 9, 2017

USDA’s June WASDE report sent old crop and new crop prices lower at week’s end, as manmade fibers take aim at cotton.

Around The Gin
Product News

Protect Cotton Potential from Weeds, Worms and Diseases

July 12, 2017

Southeast cotton producers say latest technologies from PhytoGen help protect yield and quality.

Product News

Monsanto “Troubled” by Arkansas Dicamba Decision

June 26, 2017

Monsanto has weighed in on the Arkansas Plant Board’s proposed ban of dicamba use in the state.

Product News

Drexel Adds Two Regional Sales Reps

June 16, 2017

Kyle Herring and David Davis have joined Drexel Chemical Company as regional sales representatives.

Product News

Dow AgroSciences Launching Enlist Corn in 2018

June 16, 2017

Following the launch of Enlist cotton, Dow AgroSciences will make Enlist corn commercially available for 2018 after receiving Chinese import approvals.

Product News

Transform Earns Section 18 Exemptions for Cotton, Sorghum

May 4, 2017

Transform WG insecticide has received Section 18 emergency use exemptions for use in cotton and sorghum in select states for the 2017 production season.

Product News

EPA Approves Monsanto’s NemaStrike Technology

May 2, 2017

The EPA has issued registration for tioxazafen, a new nematicide from Monsanto that will be branded as NemaStrike Technology for nematode control and yield protection in cotton, corn and soybeans.

Product News

Indigo Partners Launched for In-Field Technology Testing

April 25, 2017

Indigo is launching Indigo Partners, a collaboration of 25 U.S. growers and agronomic experts to test agricultural technologies – including Indigo’s microbial seed treatments – during 2017.

Product News

UPI Adds New Herbicide Products

April 14, 2017

UPI has added two new herbicides to its portfolio of high quality crop protection products for the U.S.

Latest News
Market Analysis

With Market Oversold, Is Bullish Return Near?

July 14, 2017

The cotton invert continues, as both the U.S. and Australian crops are oversold.

Market Analysis

Shurley: Prices Continue to Flounder in Lower Range

July 14, 2017

The July USDA crop production and supply and demand estimates report was not bad, but prices continue to show no improvement.

Market Analysis

Rain in India, U.S. Keeps Pressure on Prices

July 7, 2017

Beneficial rains in the U.S. and India kept pressure on cotton prices, as the December futures contract settled the past week unchanged.

Market Analysis

Shurley on Cotton: Where Did the Acres Go?

July 6, 2017

Dr. Don Shurley says the recent USDA Planted Acreage report did not deliver as expected, making times a bit confusing for producers looking to manage risk.

Market Analysis

Bulls Push Market on Heels of USDA Planting Report

July 5, 2017

Smaller than expected U.S. cotton plantings – and the potential smaller crop – caught the bulls’ attention in the market.

Market Analysis

Market Catching Its Breath After 10-Day Slide

June 23, 2017

After an unprecedented 10-day drop in prices, the market is trying to catch its breath.

Market Analysis

Mother Nature, Not Bulls, Managing the Market

June 16, 2017

Cotton prices took a big hit, and bullish signals are hard to find. Mother Nature is now in charge.

Market Analysis

Shurley: June Report Sends Mixed Signals

June 15, 2017

USDA’s June WASDE report contained some good news and some bad news. Overall, Dr. Don Shurley considers the report somewhat bearish.

Market Analysis

Report Softens Prices, Consumption Concerns Rise

June 9, 2017

USDA’s June WASDE report sent old crop and new crop prices lower at week’s end, as manmade fibers take aim at cotton.

Market Analysis

Sleepy Market Watching U.S. Crop Progress

June 3, 2017

The cotton market snoozed all week, watching crop development and holding solid at 72-73 cents for new crop December.

Market Analysis

Shurley: Prices Weaker but Remain Above Support

May 31, 2017

As growers complete planting and move fully into the growing season, evaluating the outlook and making price risk management decisions will be crucial.

Market Analysis

Market Settling In as Old Crop Settles Out

May 31, 2017

On-call sales versus purchases are coming in line. Old crop July is done, and the open interest contract leader is now December.

Market Analysis

Fluctuations and Cancellations Create Interesting Week

May 22, 2017

Despite price fluctuations and export sales cancellations over the past week, the cotton market hangs tough as U.S. planting continues.

Market Analysis

Shurley: Is This the Wake-Up Call We’ve Been Expecting?

May 15, 2017

Market movement in the past few weeks may be the wake-up call the industry has been expecting.

Market Analysis

Market Holding, but Lock in Prices Now

May 15, 2017

Cotton’s recent price surge is likely not done yet. But, growers who have not priced their 2017 crop should do so soon before the market softens.