By Dr. Don Shurley
Prices (Dec14 futures) appear to have turned trend up, at least for the short-term. After trading in a narrow band between 63 and 65 cents since the most recent slide, Dec14 futures this week traded three consecutive days (Wednesday, Thursday and Friday) above 65 cents.
Dec14 closed the week at 66.18 – up almost two cents for the week and the highest prices in almost a month. Should this slight recovery continue, prices are likely to meet some headwind around the 68-cent area. So, we may have some rocky ground to plow if we expect to return to something with a 7 in the front.
Crop conditions have declined three weeks in a row. This may be a contributing factor in prices stabilizing and now showing an increase. For the week ending August 17, the crop was rated 50 percent Good to Excellent – down from 52 percent the week earlier and 53 percent for the week ended August 3. The Texas crop was rated 35 percent Good to Excellent on August 17, and the Georgia crop 59 percent. The Texas crop was rated 24 percent Poor to Very Poor on August 17. The Georgia crop has shown a decline, from only 6 percent Poor to Very Poor on August 3 to 11 percent on August 17.
The August USDA numbers have the crop estimated at 17.5 million bales based on abandonment of 10 percent and yield of 820 lbs/acre. There is some belief/opinion that the U.S. crop may work its way smaller as subsequent USDA reports are released. The September precipitation forecast, however, shows above normal rainfall for the Lubbock/High Plains area, with the Mid-South and Southeast expected to have normal rainfall.
Old-crop U.S. supplies are tight at just 2.6 million bales carry-in. This, and the thought of a somewhat smaller than forecast U.S. crop, may be contributing factors in the market showing some signs of support.
The current estimate is that China will import only 8 million bales this season. Questions and uncertainty about the quality of China’s massive stocks – if quality is indeed an issue – may lead to higher than expected imports. This could also provide support for prices, but adequate supplies worldwide could still keep a rather tight lid on the advance.
Shurley is Professor Emeritus of Cotton Economics, Department of Agricultural and Applied Economics, University of Georgia