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

Quality Continues to Drive Cotton’s “Joyful Ride”

February 21, 2015

Cotton’s joyful ride continues, as prices have pressed the 65 cent level, driven by demand for quality machine harvested cotton.

Market Analysis

Plexus: Time for the Market to Rest and Regroup?

February 20, 2015

Look for the market pull back a bit and regroup over the coming weeks. But don’t worry. It’s just taking a breather.

Market Analysis

Plexus: Buying Pressure Should Keep Cotton Moving Up

February 18, 2015

Buying pressure over the coming months should help maintain the current upward move for cotton.

Market Analysis

Plexus: Market in Perfect Shape for a Short Squeeze

February 10, 2015

Since starting to move higher, the March contract has gained more than 450 points and has moved through some key resistance levels. Buyers are now firmly in control of the market.

OA Cleveland
Market Analysis

Market is Scrambling for Quality Cotton

February 7, 2015

The market is plowing new territory each week as mills search for quality cotton. And they’re starting to get desperate.

Market Analysis

Plexus: Market Maneuvering Into an “Interesting Position”

February 3, 2015

Continued strong demand for U.S. cotton has lifted the futures market to a two-week high, helping to maneuver the market into an interesting position.

Market Analysis

Will the U.S. Sell Out of Cotton?

February 2, 2015

World consumption is trending up, and the market is suggesting that the U.S. will “sell out” of cotton this year if prices do not increase.

Around The Gin
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.

Precision Technology

TeeJet Launches RX520 High-Precision GNSS Receiver

February 17, 2015

TeeJet Technologies has introduced the RX520 dual frequency GNSS receiver for precision farming operations.

Disease Control / Nematodes

Velum Total Approved for Cotton, Peanuts in 2015

February 12, 2015

Bayer CropScience has received registration for Velum Total, a new insecticide/nematicide for use in cotton and peanuts in 2015.

Disease Control / Nematodes

EPA Approves TOPGUARD Terra for Cotton Root Rot Control

February 6, 2015

TOPGUARD Terra fungicide from Cheminova has received EPA registration for control of cotton root rot.

Product News

Deltapine to Release Five Bollgard II XtendFlex Cotton Varieties

January 27, 2015

Following USDA deregulation of the Bollgard II XtendFlex cotton technology, Deltapine has announced plans to offer five new B2XF varieties for the 2015 season.

Product News

Bollgard II XtendFlex Cotton Poised for Limited Introduction

January 21, 2015

A limited introduction of Bollgard II XtendFlex cotton varieties is planned for the 2015 planting season through Deltapine and select licensees.

Latest News
Market Analysis

Quality Continues to Drive Cotton’s “Joyful Ride”

February 21, 2015

Cotton’s joyful ride continues, as prices have pressed the 65 cent level, driven by demand for quality machine harvested cotton.

Market Analysis

Plexus: Time for the Market to Rest and Regroup?

February 20, 2015

Look for the market pull back a bit and regroup over the coming weeks. But don’t worry. It’s just taking a breather.

Market Analysis

Plexus: Buying Pressure Should Keep Cotton Moving Up

February 18, 2015

Buying pressure over the coming months should help maintain the current upward move for cotton.

Market Analysis

Market Faces Long and Crooked Row to Higher Prices

February 17, 2015

The market has a very long and crooked row to hoe on its path to higher prices. However, it is sending multiple signals that the 57 cent resistance level did hold, and prices can now begin to ease higher.

Market Analysis

Shurley on Cotton: Upward Progress Finally Being Made

February 11, 2015

Prices should be nearer the bottom end of their likely range. If you’re going to plant cotton in 2015, be patient and wait for possible rallies this summer.

Market Analysis

Plexus: Market in Perfect Shape for a Short Squeeze

February 10, 2015

Since starting to move higher, the March contract has gained more than 450 points and has moved through some key resistance levels. Buyers are now firmly in control of the market.

Market Analysis

Market is Scrambling for Quality Cotton

February 7, 2015

The market is plowing new territory each week as mills search for quality cotton. And they’re starting to get desperate.

Market Analysis

Plexus: Market Maneuvering Into an “Interesting Position”

February 3, 2015

Continued strong demand for U.S. cotton has lifted the futures market to a two-week high, helping to maneuver the market into an interesting position.

Market Analysis

Will the U.S. Sell Out of Cotton?

February 2, 2015

World consumption is trending up, and the market is suggesting that the U.S. will “sell out” of cotton this year if prices do not increase.

Market Analysis

Shurley on Cotton: Prices Struggle as New Round of Weakness Sets In

January 26, 2015

For the fourth time since last spring, prices have again failed to hold support as new negative forces overtake the market. The decline in prices is concerning, but is offset somewhat by a strong basis and premiums for quality and an increasing LDP/MLG.

Market Analysis

Market Struggles with Black Swans and Bears

January 26, 2015

Although the bears have finally pulled prices into the 50s, the ability of old crop cotton to hold near the 60 cent level is phenomenal, given the current “Black Swan” financial market.

Market Analysis

Plexus: Get Ready for a Few Weeks of Volatility

January 23, 2015

While the market situation for U.S. cotton may seem friendly, it is being overshadowed by the negative outlook for commodities stemming from a strong dollar, lower economic growth and fears of another financial meltdown.

Market Analysis

Bears Are Growling, but Market Holds Firm

January 19, 2015

The fifty-centers are still out there and are beginning to beat their drums louder and louder, but the current trading range has proven to be most resilient.

Market Analysis

Plexus: Price Reacting to Non-Cotton Issues

January 16, 2015

Negative vibes from outside markets are overshadowing fairly constructive developments on the cotton front.

Market Analysis

Shurley on Cotton: Prices Just Treading Water

January 13, 2015

Recent activity has simply solidified the sideways pattern this market has been in for quite a while.