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

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.

Market Analysis

Market Set for Shift to March Contract

November 21, 2016

The market is expected to rally higher early in the week as shorts buy their way out. Grower prices will then be based on the March contract, as December will be its expiry period.

Market Analysis

Watch for Volatility as December Contract Period Ends

November 4, 2016

There are only a few trading days left before March becomes the lead spot month. The best remaining pricing opportunity for growers should be within this time frame, which could be active and volatile.

Market Analysis

Potential Supply Squeeze Could Push Market Higher

October 31, 2016

With December first notice day only three weeks away, mill buying and other potential squeeze factors could push the December contract to 75 cents and beyond.

Market Analysis

Cleveland: Prices Healthier; China’s Buying

October 21, 2016

After jumping higher on the heels of a bullish world supply demand report, the surge in cotton prices was halted at the 72 cent resistance level. But China is back in buying mode, snapping up nearly 200,000 bales.

Market Analysis

Shurley on Cotton: Prices Showing Stability and Potential

October 17, 2016

Many growers want to know when and if the market will get back above 70 cents and provide options to enhance marketing positions. Several factors now in play could give them that opportunity.

Market Analysis

Cleveland: Market Weakens as Prices Begin to Slide

October 9, 2016

The market is showing signs of vulnerability, as cotton appears headed back to the mid-60s.

Around The Gin
Product News

Valent Introduces Valor EZ Herbicide for 2017

December 1, 2016

Valent has introduced Valor EZ Herbicide as a residual herbicide partner for the new next generation seed systems in cotton and soybeans.

Product News

Wearable Cotton Sensors Developed

November 29, 2016

Conductive cotton fabrics have been developed into flexible wearable sensors, creating new options for cotton textiles.

Product News

Dow AgroSciences, U.S. Farmers Disagree with Proposal to Revoke Chlorpyrifos Tolerances

November 10, 2016

Dow AgroSciences is standing by the safety of proper use of chlorpyrifos, in the face of EPA’s release of a pre-publication copy of the Notice of Data Availability related to its assessment of human health risks associated with the insecticide.

Product News

Advanced Germplasm and Traits Help Growers Thrive in Cotton

November 7, 2016

PhytoGen offers options to improve fiber quality and control weeds, helping growers to out-best their best and thrive in cotton.

Product News

EPA Sets Comment Period for Enlist Duo Label Expansion

November 2, 2016

The U.S. EPA has set a public comment period until December 1 for proposed label amendments for Enlist Duo, which would allow use on Enlist cotton and extend product use on all Enlist crops to 19 other states.

Product News

Helping Cotton Growers Be Good Neighbors

November 1, 2016

Good fences make good neighbors. But these days, on-target herbicide applications also can help make growers good neighbors.

Product News

Americot Offers New XtendFlex Cotton Varieties for 2017

October 28, 2016

In 2017, Americot will offer three new Bollgard II XtendFlex varieties and one new XtendFlex only variety to cotton growers.

Product News

Bayer Delivers Right Combinations for Performance and Profit

October 27, 2016

The extensive economic data documenting earnings from FiberMax and Stoneville varieties helps make the Bayer lineup the first stop for variety decisions.

Latest News
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.

Market Analysis

Market Set for Shift to March Contract

November 21, 2016

The market is expected to rally higher early in the week as shorts buy their way out. Grower prices will then be based on the March contract, as December will be its expiry period.

Market Analysis

Shurley on Cotton: Closing Out 2016, First Look at 2017

November 21, 2016

The 2016 U.S. crop may still be somewhat of a question mark, but USDA’s November numbers provided clarity on a few things – the crop got smaller in some areas as expected, but still got bigger overall.

Market Analysis

Cleveland: Volatility Reinforces Market Fireworks

November 11, 2016

The cotton market continues to show extreme volatility, as mills and speculative funds attempt to fix prices before the expiry of the December contract. The same fireworks are predicted for the next two weeks.

Market Analysis

Watch for Volatility as December Contract Period Ends

November 4, 2016

There are only a few trading days left before March becomes the lead spot month. The best remaining pricing opportunity for growers should be within this time frame, which could be active and volatile.

Market Analysis

Potential Supply Squeeze Could Push Market Higher

October 31, 2016

With December first notice day only three weeks away, mill buying and other potential squeeze factors could push the December contract to 75 cents and beyond.

Market Analysis

Cleveland: Prices Healthier; China’s Buying

October 21, 2016

After jumping higher on the heels of a bullish world supply demand report, the surge in cotton prices was halted at the 72 cent resistance level. But China is back in buying mode, snapping up nearly 200,000 bales.

Market Analysis

Shurley on Cotton: Prices Showing Stability and Potential

October 17, 2016

Many growers want to know when and if the market will get back above 70 cents and provide options to enhance marketing positions. Several factors now in play could give them that opportunity.

Market Analysis

Cleveland: Market Weakens as Prices Begin to Slide

October 9, 2016

The market is showing signs of vulnerability, as cotton appears headed back to the mid-60s.

Market Analysis

Cleveland: What Goes Up, Must Readjust

September 30, 2016

Last week’s higher prices limited export sales, and prices had to move lower this week, back down to mill offers.

Market Analysis

Cleveland: Bulls Ride Prices into the Mid-70s

September 23, 2016

Two weeks ago, we suggested that the USDA supply demand report would be neutral and the market would drop, yet only to reverse to and jump higher. It jumped this week. Wildly higher.

Market Analysis

Cleveland: The Bear/Bull Balance Continues

September 19, 2016

Cotton prices ended the week lower, but made gains after triple digit losses in trading that followed USDA’s September supply demand report.

Market Analysis

Shurley on Cotton: Market Unhappy with September Estimates

September 15, 2016

Whatever the market was expecting from the September WASDE report, it didn’t get. So prices reacted accordingly – down.

Market Analysis

Bulls Feed on Cotton Trade Opportunities

September 12, 2016

Although U.S. and world crops are slightly larger than originally estimated, production difficulties in Pakistan and other countries will continue to boost world cotton trade and add support to the market.

Market Analysis

Cleveland: The Bulls Battle Back

September 6, 2016

The December contract again became the darling of the bulls, who won the week after having their backs slammed against the wall.