Shurley on Cotton: Prices Attempt to Stabilize, But Still Show Weakness

By Dr. Don Shurley

 

Over the past two weeks, prices for Dec14 futures have continued to slide, but tried to stabilize in a tight band of mostly 67 to 68.5 cents. Typically when you see an extended narrow trading range like this, it indicates that there is not much pressure/interest to push prices either direction on current news. Until July 24, it seems.

On July 24, prices suddenly broke down 203 points to close at just over 66 cents. This may signal yet another round of weakness in prices.

This week’s export report showed a second consecutive week of strong 2014/15 sales. Unfortunately, it wasn’t enough to prevent the 200 point decline in Dec14 prices. It has been expected that good export sales at these now lower prices would be the medicine to what ails this market, or at least slow the bleeding. This recent decline tells us that other factors/concerns are obviously also at play.

Reports seem to suggest that the decline was due to forecasts for slower than expected global economic growth and forecast for higher than expected acreage and production of cotton in India.

Crop conditions have declined slightly for three consecutive weeks (as of July 20). In reality, the condition of the crop has changed little the entire season, hovering around 3.5 (mostly fair to good). Present crop condition, on average, is running ahead of last year. While crop condition has been relatively unchanged, Dec14 prices have declined 10 cents, suggesting other significant factors are at play.

Crop condition on August 1 is not always a reliable predictor of yield. A crop condition of 3.5 could suggest a yield of 820 to 830 lbs per acre. But some years have been “outliers,” and have been much better or worse than this. The current USDA estimate is 16.5 million bales at 816 lbs/acre. The August estimate will be the first of the season based on actual producer survey and conditions. An August estimate that would push the crop higher will likely continue to add downward pressure on prices. Future price direction will depend on any supply shocks globally and demand news.

Shurley is Professor Emeritus of Cotton Economics, Department of Agricultural and Applied Economics, University of Georgia

Topics: ,

Leave a Reply

Market Analysis Stories
Market Analysis

Mother Nature Now in Charge of the Market

July 24, 2016

At this point in the crop production year, be assured that Mother Nature will still have the major say with respect to cotton prices.

Market Analysis

Watching Bulls, Bears and Fundamentals

July 11, 2016

Fundamentals rule in the long run, but technicals provide the roadmap. Just be sure to keep an eye on the bulls and bears.

Market Analysis

Cleveland: A Fun Week of Bulls, Bears and Brexit

July 5, 2016

The cotton market experienced a fun, exciting week as trading focused on strong bullish and bearish fundamentals – and little to no impact from Brexit.

Market Analysis

Shurley: Acreage Numbers Could Challenge Range-Bound Prices

July 1, 2016

In light of the June 30 USDA acres planted numbers, it would have to be considered good news if cotton’s “range bound” prices can remain at or above 64 cents.

Market Analysis

Market Fundamentals Positive, but Not Yet Bullish

June 20, 2016

July prices are still bumping into resistance. But there are enough positive fundamentals in the market to provide a bit of bullish hope.

Market Analysis

Shurley on Cotton: Thoughts Ahead of the Acreage Report

June 16, 2016

There’s usually speculation on the June USDA Acreage number and how it might compare to the March Prospective Plantings number. So far, it's all quiet.

Market Analysis

Commodity and Mill Actions Pushing Cotton Higher

June 10, 2016

It was a pretty good week for cotton, as fund money continued to flow to all commodities, and mills began to ease their price expectations higher.

Around The Gin
Product News

Indigo Launches Water Efficiency Product for Cotton

July 26, 2016

Boston-based research firm Indigo has launched its first commercial product – Indigo Cotton – which helps improve the cotton plant’s water use efficiency.

Product News

Enlist Technology Provides Tolerance to Three Key Herbicides

July 13, 2016

The Enlist weed control system will give growers the ability to use three modes of action postemergence in both cotton and soybeans.

Product News

Providing Upland Varieties with Acala-like Quality

July 13, 2016

PhytoGen offers growers several upland cotton varieties with Acala-like fiber quality for added premiums and higher profitability.

Product News

PhytoGen Names Winners in Best Yielder Club Sweepstakes

June 29, 2016

A North Carolina cotton grower was named grand prize winner in the 2016 PhytoGen Best Yielder Club sweepstakes.

Product News

Monsanto Donates Research Center to Local Foundation

June 27, 2016

Monsanto Company has donated its 150-acre Leland Agronomy Center to The B.F. Smith Foundation, a nonprofit organization in the Mississippi Delta.

Product News

Record Yields Set by 2015 FiberMax One Ton Club

May 4, 2016

The 127 members who qualified for the FiberMax One Ton Club pushed cotton yields and quality to higher levels in 2015.

Product News

Meister Media Worldwide Website Relaunches With New Resources

April 22, 2016

Meister Media Worldwide — publisher of Cotton Grower magazine – has relaunched its corporate website, highlighting information and services available from one of agriculture’s leading media companies.

Product News

ReinCloud Promises Remote Control

April 18, 2016

New software set to combine irrigation management and data collection – all in the palm of your hand.

Latest News
Market Analysis

Mother Nature Now in Charge of the Market

July 24, 2016

At this point in the crop production year, be assured that Mother Nature will still have the major say with respect to cotton prices.

Market Analysis

Cleveland: USDA Turns the Bulls Loose

July 18, 2016

Say it again: Technicals are the leading indicator of fundamentals; they kept telling us higher prices were coming.

Market Analysis

Shurley on Cotton: It’s Christmas in July!

July 13, 2016

The calendar says July. But for cotton growers, it may as well be “Merry Christmas.”

Market Analysis

Watching Bulls, Bears and Fundamentals

July 11, 2016

Fundamentals rule in the long run, but technicals provide the roadmap. Just be sure to keep an eye on the bulls and bears.

Market Analysis

Cleveland: A Fun Week of Bulls, Bears and Brexit

July 5, 2016

The cotton market experienced a fun, exciting week as trading focused on strong bullish and bearish fundamentals – and little to no impact from Brexit.

Market Analysis

Shurley: Acreage Numbers Could Challenge Range-Bound Prices

July 1, 2016

In light of the June 30 USDA acres planted numbers, it would have to be considered good news if cotton’s “range bound” prices can remain at or above 64 cents.

Market Analysis

Market Fundamentals Positive, but Not Yet Bullish

June 20, 2016

July prices are still bumping into resistance. But there are enough positive fundamentals in the market to provide a bit of bullish hope.

Market Analysis

Shurley on Cotton: Thoughts Ahead of the Acreage Report

June 16, 2016

There’s usually speculation on the June USDA Acreage number and how it might compare to the March Prospective Plantings number. So far, it's all quiet.

Market Analysis

Commodity and Mill Actions Pushing Cotton Higher

June 10, 2016

It was a pretty good week for cotton, as fund money continued to flow to all commodities, and mills began to ease their price expectations higher.

Market Analysis

Mills, Speculators and Weather Driving Cotton Prices

June 7, 2016

Mother Nature’s recent whims are driving new money into cotton, as mills come to grips with rising prices and price fixations, which fuel buying by hedge fund long speculators.

Market Analysis

Shurley on Cotton: A Watchful Summer Lies Ahead

June 7, 2016

As planting season ends and summer approaches, the challenge for growers will be if, and when, to take price protection – and, if so, how to do it.

Market Analysis

Strange Mix of Positive Signs for the Market

May 31, 2016

Speculative funds, issues in India, U.S. plantings and strong sales have put the cotton market in a positive mood.

Market Analysis

Planting Progress, China’s Reserve Auctions Driving Market

May 23, 2016

Cotton futures had a few triple digit days this past week. Yet, thanks to a combination of influences, the bulls carried the week – if only slightly.

Market Analysis

Shurley on Cotton: Prices Get a Much Needed Bounce

May 19, 2016

April was a good month for cotton prices. So far, May hasn’t been, but prices seem to be attempting a slight recovery.

Market Analysis

USDA Report Shifts Numbers, Pressures Prices

May 16, 2016

USDA’s May supply demand report brought pressure to the cotton market and moved prices slightly lower to the critical 60-61 cent support level.