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

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.

World Cotton Use
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.

OA Cleveland
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.

Market Analysis

Shurley on Cotton: So Far, Prices Fail To Advance

April 28, 2015

To date, there has been little, if any, incentive for producers to do much with regard to pricing this year’s crop.

Market Analysis

Cotton Inc. Resets Risk Management Seminar in Maricopa for May 19

April 28, 2015

May 19 is the new date for Cotton Incorporated’s Cotton Price Risk Management Seminar in Maricopa, AZ.

Around The Gin
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.

Product News

Brake Herbicide Receives Section 18 Approvals in Six States

February 18, 2015

Brake Herbicide has received Section 18 emergency use exemptions for control of glyphosate-resistant Palmer amaranth in six cotton producing states.

Precision Technology

TeeJet Matrix 430 Provides Simple, Easy-to-Use Guidance

February 18, 2015

TeeJet Technologies’ new Matrix 430 GNSS guidance system is ideal for a wide range of field applications.

Latest News
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.

Market Analysis

Shurley on Cotton: So Far, Prices Fail To Advance

April 28, 2015

To date, there has been little, if any, incentive for producers to do much with regard to pricing this year’s crop.

Market Analysis

Cotton Inc. Resets Risk Management Seminar in Maricopa for May 19

April 28, 2015

May 19 is the new date for Cotton Incorporated’s Cotton Price Risk Management Seminar in Maricopa, AZ.

Market Analysis

Market Bumps Upward as the Weather Watch Begins

April 27, 2015

The cotton market jumped higher this week, finding price support from the litany of pre-plant weather problems around the globe.

Market Analysis

Market Lows Remain Higher, Even With Recent Price Dip

April 20, 2015

Cotton futures gave up three weeks of gains last week as the market lost some 200 points. Yet the market continues to see higher and higher lows, which generally points to an uptrend.

Market Analysis

Shurley on Cotton: Prices Heading Toward “Testing Ground”

April 10, 2015

Now that old crop has clearly broken through 65 cent ceiling, there is belief that prices will continue to trek higher toward a new “testing ground.”

Market Analysis

Tight Supplies of Quality Cotton Poised to Drive Market Higher

April 5, 2015

A very tight quality shortage that only gets tighter will drive cotton prices higher. This market has 70 cents, basis December, written all over it.

Market Analysis

Plexus: Factors Lining Up for Price Growth

April 3, 2015

Reduced global acreage, increased mill demand and low inventories of quality cotton could help push prices into the high 60s or even low 70s over the next few months.

Market Analysis

Shurley on Cotton: USDA Planting Intentions In; Time for Market to Focus on Other Realities

March 31, 2015

The March 31 USDA Prospective Plantings report of 9.55 million cotton acres is slightly higher than most other pre-report expectations. Now, it’s time for the market to focus on other matters.