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

Time for Growers to Start Pricing Their 2017 Crop

February 17, 2017

Dr. O.A. Cleveland believes growers should price at least 50% of their anticipated 2017 crop now with the December ICE contract above 74 cents.

Market Analysis

NCC: U.S. Cotton Industry Hinges on World Demand, China, Global Supply

February 11, 2017

According to NCC economists, several key questions will shape the 2017 economic outlook for the U.S. cotton industry.

Market Analysis

78 Cent Cotton? The Opportunities are There.

February 6, 2017

Titanic bullishness has captured the cotton market, providing opportunities for nearby cotton futures prices to top 78 cents.

Market Analysis

Strengthening Prices, Strong Demand and Bon Jovi Jeans

January 30, 2017

The narrow three cent trading range – 72.50 to 75.50 cents – remains in play, but pressure is building for cotton prices to move higher. Maybe Jon Bon Jovi’s new line of denim jeans will help.

Market Analysis

Market Remains Strong as The Limited Bows Out

January 20, 2017

The market consolidated gains of the past few weeks, just as The Limited – a primary supplier of cotton to women – closes its doors.

don shurley
Market Analysis

Shurley on Cotton: Opportunities in Improved Market

January 16, 2017

March futures have improved, and January is looking like a good month. The big question and the uncertainty is whether or not this will last.

Market Analysis

Market Holds in Face of USDA Report Adjustments

January 16, 2017

From now likely into the mid-March trading period, the very bullish call sales ratio will continue to carry the ball for the bulls.

Around The Gin
Product News

Six Greenleaf Nozzles Approved for Use with XtendiMax

February 24, 2017

Six TurboDrop D Series nozzles from Greenleaf Technologies have been approved for use with Monsanto’s XtendiMax herbicide with VaporGrip Technology.

Product News

EPA Approves DuPont’s FeXapan Dicamba Herbicide

February 17, 2017

DuPont has received EPA registration for FeXapan herbicide plus VaporGrip Technology, a low-volatility dicamba formulation for use on cotton and soybean varieties carrying traits that provide tolerance to dicamba and glyphosate herbicides.

Product News

Fourteen Southern States Register Enlist Duo for Use on Enlist Crops

February 14, 2017

Thirteen Southern states have granted state registration of Enlist Duo herbicide for use on Enlist cotton and other crops, following federal registration received in January.

Product News

BASF Application Academy Adds Online Training Module

February 2, 2017

BASF has added an online training module to its On Target Application Academy stewardship program to help increase education of new and advanced herbicide technologies.

Product News

Bayer Offers Shared Risk Program for FiberMax, Stoneville Growers

January 26, 2017

Bayer is helping support the economic sustainability of cotton growers through the company’s 2017 Shared Risk Program for those who plant FiberMax and Stoneville cotton seed.

Product News

Enlist Duo Herbicide Registered for Use on Enlist Cotton

January 13, 2017

The U.S. EPA has registered Enlist Duo herbicide for use on Enlist cotton varieties, beginning in 2017.

Product News

Data Show Yield Gains from Indigo Cotton in 2016

January 9, 2017

Data collected from 2016 trials show that Indigo Cotton – a seed treatment based on naturally occurring, in-plant microbes to help increase water use efficiency – led to yield improvements on testing acres, including an 11% average yield increase in West Texas.

Product News

FiberMax and Stoneville Release New Varieties for 2017

January 9, 2017

Cotton growers searching to match the right variety the right field now have two new FiberMax varieties and two new Stoneville varieties to consider for 2017.

Latest News
Market Analysis

Time for Growers to Start Pricing Their 2017 Crop

February 17, 2017

Dr. O.A. Cleveland believes growers should price at least 50% of their anticipated 2017 crop now with the December ICE contract above 74 cents.

Market Analysis

Shurley on Cotton: A Lot Going on and a Lot to Digest

February 13, 2017

The 2017 cotton market appears to be on increasingly stable and improved economic footing compared to 2016.

Market Analysis

NCC: U.S. Cotton Industry Hinges on World Demand, China, Global Supply

February 11, 2017

According to NCC economists, several key questions will shape the 2017 economic outlook for the U.S. cotton industry.

Market Analysis

Market Fueled by Demand, Mills and Shrinking Carryover

February 10, 2017

Cotton futures continue to hold tight to the 75-76 cent level, thanks to ever-increasing demand, mill indecision and shrinking world carryover.

Market Analysis

78 Cent Cotton? The Opportunities are There.

February 6, 2017

Titanic bullishness has captured the cotton market, providing opportunities for nearby cotton futures prices to top 78 cents.

Market Analysis

Strengthening Prices, Strong Demand and Bon Jovi Jeans

January 30, 2017

The narrow three cent trading range – 72.50 to 75.50 cents – remains in play, but pressure is building for cotton prices to move higher. Maybe Jon Bon Jovi’s new line of denim jeans will help.

Market Analysis

Market Remains Strong as The Limited Bows Out

January 20, 2017

The market consolidated gains of the past few weeks, just as The Limited – a primary supplier of cotton to women – closes its doors.

Market Analysis

Shurley on Cotton: Opportunities in Improved Market

January 16, 2017

March futures have improved, and January is looking like a good month. The big question and the uncertainty is whether or not this will last.

Market Analysis

Market Holds in Face of USDA Report Adjustments

January 16, 2017

From now likely into the mid-March trading period, the very bullish call sales ratio will continue to carry the ball for the bulls.

Market Analysis

Bull Market Pushes Prices to Five Month High

January 9, 2017

Prices reached a five-month high, as cotton demand flexed its muscles and pushed the market up.

Market Analysis

Could the Market Drift into the Mid-70s? It’s Possible.

December 28, 2016

The 70-73 cent price range remains very firm, with a good chance that the market could drift into the mid-70s.

Market Analysis

Export Sales Drive Market as Potential for Explosive Growth Builds

December 19, 2016

U.S. export sales continue to lead trading. But conditions are growing for a potential “explosive fire” under the market.

Market Analysis

Shurley: December Numbers May Contain Hidden Stocking Stuffers

December 12, 2016

USDA’s December production and supply/demand estimates were as expected in some respects. But it also contained a few unexpected and positive surprises.

Market Analysis

Is Market Opening Window for “Made in U.S.” Revival?

December 12, 2016

USDA’s seemingly bearish December supply demand report failed to break cotton’s upside momentum, presenting a small window to potentially revive the “Made in U.S.” theme.

Market Analysis

Prices Hold as U.S. Quality Cotton Moves to Market

December 2, 2016

U.S. crop quality is essentially the highest on record. While mills may be facing potentially higher prices, they are getting a bargain on their U.S. purchases.