Rain Washes Markets Lower, Watch for Short Term Volatility

To borrow a long existing quote, “When it Rains it Pours.” And pour it did, essentially on the entire drought-stricken Texas plains and the U.S. Southwest.

Yes, there were a few locations that did not receive rainfall, but only a very few. Dryland cotton growers are still dancing in the streets in celebration of two to four inches of rain.

As expected, the moisture sent prices three cents lower almost immediately. The bulls ran for cover with more muster than mill fixations could provide price support. The market is now down some 11 cents in the July contract and seven cents in the new crop December contract, and is attempting to hold the line on any further price decline.

Because of demand, the July contract will likely have more success than the December contract on any attempt to move higher. Yet, the July contract will most likely struggle on any attempt to move above 88 cents. December will have its hands full holding 75 cents, and will not if the Texas dryland receives any more timely moisture.

The cotton bulls were completely “done in” by the rain, as weather-related speculative selling and grower hedging left the market with few buyers. Past this initial selling, the price dip echoed across the trading community, and speculative funds bailed out of their massive holding of longs – historically one of the largest long positions ever held in the cotton futures market. The profit taking from the large funds drove prices below trend lines.

The July contract can still jump higher, but December prices are likely locked in a downtrend. As we had commented many times, Mother Nature was in charge.

With July futures less than three weeks from first notice, day prices should be expected to be highly volatile. Too, July futures should find support from an increase in export sales, especially given the current low prices (85 to 88 cents). However, the new crop December futures contract will remain under pressure for the coming month, as planting progress across the Northern Hemisphere has crossed the midway point.

U.S exports sales for both seasons were some 180,000 RB, with China taking some 23,000 bales for immediate shipment.

As if the rains in Texas were not enough to send prices lower, the Indian monsoon – predicted to be very weak and late – has arrived early. Indian growers are viewing this as a signal to increase cotton plantings, and this increase should move India to the position of the world’s leading producer. Likewise, India will soon become the world’s principal consumer of cotton as the Chinese textile spinning contracts.

Yet, China continues – and will continue – to be an active importer of cotton. The Chinese mills continue to shun the bulk of offers from the Reserve, preferring to pay a premium and import foreign growths, principally Australian, U.S., West African and Brazilian – all machine-picked high grades.

December must now overcome the market’s perception that all Texas drought problems have been solved. Mother Nature will continue to keep an active hand in crop progress as, despite the rains, there is still a severe lack of any subsoil moisture. In the meantime, December prices will remain under pressure. Look for a trading range from 72 to 80 cents.

Topics:

Leave a Reply

Market Analysis Stories
Market Analysis

Shurley on Cotton: The Path to 70 Cents Is Still Negotiable, but Rocky

July 24, 2015

The goal of 70 cents is still possible, but each passing day likely lowers the odds that we can get there. We just need to make sure we know what our alternatives are and act accordingly.

Market Analysis

Cleveland: Market Movement Still Stuck in the Mud

July 24, 2015

It looks as if the cotton market is frozen in time, and some teeth may have to be pulled in order to get the market moving again.

Market Analysis

Shurley On Cotton: A New Floor for Planted Acres

July 2, 2015

  By Dr. Don Shurley The long-awaited and much anticipated first estimates of actual crop acres planted for 2015 are

Market Analysis

Will Spring Rains Offer Price Relief in 2015?

July 2, 2015

Will this year’s decline in planted acres offer some price release sometime soon? That’s the question waiting for an answer.

OA Cleveland
Market Analysis

Late Week Fireworks Could Signal Something Bullish for Cotton

June 29, 2015

Round and round and round she goes… Where she stop no one knows. The circus crier could have found employment

Market Analysis

Unchanged Variables Keep Market Moving Nowhere Fast

June 22, 2015

It’s the lull before the storm, and nothing in the cotton market will change until Mother Nature makes her decisions.

Market Analysis

Marking Time Thanks to USDA, China and Mother Nature

June 14, 2015

The cotton market marked time this past week, thanks to USDA, China and Mother Nature.

Around The Gin
Product News

Nufarm Introduces Panther SC Herbicide

July 24, 2015

Nufarm is introducing Panther SC herbicide, a new broad-spectrum herbicide for use in cotton and other Southern row crops.

Product News

USDA Deregulates Dow AgroSciences’ Enlist Cotton Trait

July 23, 2015

The USDA has deregulated Dow AgroSciences’ Enlist cotton trait in the United States.

Product News

Ratting Out Copper Theft

June 10, 2015

A simple alarm technology is helping to stop copper thieves who target irrigation systems.

Product News

EPA Approves New Premix for 2016 for Cotton, Soybean Weed Control

May 29, 2015

Cotton and soybean growers will have a new weed control option in 2016 with Warrant Ultra Herbicide, a premix of acetochlor and fomesafen.

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.

Latest News
Market Analysis

Cleveland: Market Movement Still Stuck in the Mud

July 24, 2015

It looks as if the cotton market is frozen in time, and some teeth may have to be pulled in order to get the market moving again.

Market Analysis

Shurley on Cotton: The Path to 70 Cents Is Still Negotiable, but Rocky

July 24, 2015

The goal of 70 cents is still possible, but each passing day likely lowers the odds that we can get there. We just need to make sure we know what our alternatives are and act accordingly.

Market Analysis

Shurley on Cotton: Prices Tracking Back Down the Same Row

July 13, 2015

If cotton prices were a piece of heavy farm machinery, the market would have a serious compaction problem, tracking over the same ground time after time after time.

Market Analysis

July Supply Demand Report Proves to Be a Bear in Bull’s Clothing

July 13, 2015

The release of USDA’s July supply demand report quickly turned a big bull report day into a date with the big bear.

Market Analysis

Shurley On Cotton: A New Floor for Planted Acres

July 2, 2015

  By Dr. Don Shurley The long-awaited and much anticipated first estimates of actual crop acres planted for 2015 are

Market Analysis

Will Spring Rains Offer Price Relief in 2015?

July 2, 2015

Will this year’s decline in planted acres offer some price release sometime soon? That’s the question waiting for an answer.

Market Analysis

Late Week Fireworks Could Signal Something Bullish for Cotton

June 29, 2015

Round and round and round she goes… Where she stop no one knows. The circus crier could have found employment

Market Analysis

Unchanged Variables Keep Market Moving Nowhere Fast

June 22, 2015

It’s the lull before the storm, and nothing in the cotton market will change until Mother Nature makes her decisions.

Market Analysis

Marking Time Thanks to USDA, China and Mother Nature

June 14, 2015

The cotton market marked time this past week, thanks to USDA, China and Mother Nature.

Market Analysis

Shurley on Cotton: June Numbers Leave Bulls in the Corral for Now

June 12, 2015

Cotton growers are optimistically waiting for prices to break to the upside. But patience is wearing thin.

Market Analysis

Cotton Market Poised to Respond to Mother Nature

June 8, 2015

The range bound trading continues for cotton without any change in sight until time passes and Mother Nature does what

Market Analysis

Mother Nature Now Controls the Market

June 1, 2015

Mother Nature has taken control of the market, thanks to weather-related acreage losses in the U.S., India and China.

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.