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

Cotton Prices Settle, Poised to Climb Again

February 16, 2018

The market’s downside move appears to be over, ending a three-week downturn.

Market Analysis

Cotton Futures Nudge Higher, Despite Forecast for Rising U.S. Sowings

February 13, 2018

Cotton futures nudged higher, despite a much-watched survey on U.S. sowings showing a seven-year high, as the estimate came in

Market Analysis

Still Optimistic, but Fundamentals Do Rule the Market

February 3, 2018

Last week’s price correction was overdue, yet the market is still positive. But it’s best to remember that the simple fundamentals of supply and demand do rule the day.

Market Analysis

“Here We Go Again” as Market Preps Another Run

January 26, 2018

The price breakout above 80 cents continues to build its base in the very low 80s as it prepares for its next challenge to the 85 cent level.

OA Cleveland
Market Analysis

Could Quality Shortage Push Cotton to a Dollar?

January 19, 2018

Cotton’s roller coaster price trip is on, and it’s really just beginning. The steep incline is in front of us.

Market Analysis

Shurley: Things to Consider as Prices Climb

January 19, 2018

The reasons for better prices seem fairly obvious, but the strength of the current uptrend has been surprising. Looking ahead, growers need to keep certain factors in mind.

Market Analysis

Cleveland: The Bull Will Continue Charging

January 12, 2018

Multiple market factors are at work, with demand continuing to lead the way to higher prices. That means the bull market will keep charging ahead.

Around The Gin
Product News

Bayer Shares the Risk with Cotton Farmers

January 26, 2018

Bayer offers replant, crop loss and yield protection to growers who plant FiberMax and Stoneville cotton seed.

Product News

Americot Adds New Sales Support in GA, KS and TX

January 23, 2018

Americot has expanded its sales support team in Georgia, Kansas and the Rolling Plains of Texas.

Product News

Indigo Offers Premium for Indigo Cotton Production

January 9, 2018

Indigo Ag has announced a new program that offers significant price premiums for U.S. cotton growers who contract to grow Indigo Cotton.

Product News

New Bayer Varieties Focus on High Yield, Adaptability

January 5, 2018

Bayer releases five new FiberMax and Stoneville varieties for introduction in 2018.

Product News

New PhytoGen TRiO Guards Cottonseed Investment

January 3, 2018

New PhytoGen TRiO seed treatment helps provide early season protection for young cottonseed from diseases, insects and nematodes.

Product News

Americot Adds Seven to Sales, Research Teams

December 20, 2017

Americot has added seven new sales and research associates to the company’s staff across the Cotton Belt.

Product News

Seven New Varieties in Deltapine Class of 18

December 11, 2017

Seven new varieties – including five Bollgard 3 XtendFlex offerings – join the Deltapine product lineup as the Class of 18.

Product News

Special Roundup Ready PLUS Incentives for Arkansas

December 7, 2017

Monsanto is offering a special Roundup Ready PLUS Crop Management Solutions platform in Arkansas for 2018 for growers planting XtendFlex cotton and Roundup Ready 2 Xtend soybean varieties.

Latest News
Market Analysis

Cotton Prices Settle, Poised to Climb Again

February 16, 2018

The market’s downside move appears to be over, ending a three-week downturn.

Market Analysis

Cotton Futures Nudge Higher, Despite Forecast for Rising U.S. Sowings

February 13, 2018

Cotton futures nudged higher, despite a much-watched survey on U.S. sowings showing a seven-year high, as the estimate came in

Market Analysis

NCC: Multiple Factors Offer Mixed Signals for Cotton

February 11, 2018

According to NCC economists, a few key factors will shape the U.S. cotton industry’s 2018 economic outlook.

Market Analysis

Talking Curveballs, Credibility and Carryovers

February 9, 2018

The February WASDE report served up a curve ball that caught the industry off guard. For the sake of USDA’s reputation, I hope they are correct.

Market Analysis

Still Optimistic, but Fundamentals Do Rule the Market

February 3, 2018

Last week’s price correction was overdue, yet the market is still positive. But it’s best to remember that the simple fundamentals of supply and demand do rule the day.

Market Analysis

“Here We Go Again” as Market Preps Another Run

January 26, 2018

The price breakout above 80 cents continues to build its base in the very low 80s as it prepares for its next challenge to the 85 cent level.

Market Analysis

Could Quality Shortage Push Cotton to a Dollar?

January 19, 2018

Cotton’s roller coaster price trip is on, and it’s really just beginning. The steep incline is in front of us.

Market Analysis

Shurley: Things to Consider as Prices Climb

January 19, 2018

The reasons for better prices seem fairly obvious, but the strength of the current uptrend has been surprising. Looking ahead, growers need to keep certain factors in mind.

Market Analysis

Cleveland: The Bull Will Continue Charging

January 12, 2018

Multiple market factors are at work, with demand continuing to lead the way to higher prices. That means the bull market will keep charging ahead.

Market Analysis

Cleveland: Don’t Ignore the Gift Horse. Feed the Market!

January 7, 2018

Don’t get caught looking a gift horse in the mouth. Cotton prices are at a profitable level for growers, and the market is asking to be fed.

Market Analysis

Shurley: New Year Cotton Policy Update

January 5, 2018

Recent legislative action in Congress could potentially bring cotton back under Title I commodity protection. Dr. Don Shurley explains the details.

Market Analysis

Shurley: December Report Seals the Deal

December 19, 2017

Based on the December USDA Crop Production numbers, any notion of this 2017 crop getting below 21 million bales seems unlikely at this point.

Market Analysis

It’s a Wonderful Day in Cotton’s Neighborhood

December 15, 2017

With apologies to Mr. Rogers…it’s a wonderful day in the neighborhood, and the cotton market has been mine.

Market Analysis

With Prices Rallying, It’s Time for “Significant Action”

December 8, 2017

The long-awaited rally above 70 cents appeared to mature this week. For those not already priced at 75 cents, it could be time to take significant action.

Market Analysis

Prices Push Above 70 Cents as Demand Remains High

December 2, 2017

Driven by tightening world stocks and led by an ever-increasing world consumption, cotton prices continue to move higher.