facebook_pixel

Texas Rain, Monsoons and Cotton Prices All Linked in Bearish Market

Cotton prices have broken the 65 to 66 cent support level, basis December. And, besides the limited support between the 60 to 62 cent range, the next line of defense sits all the way down at 57 cents.

Market technicals suggest the 60 to 62 cent level will hold, at least in the very short run. Yet, the possibility of a trade below 60 cents looms large. The market is all but screaming for a correction, yet the bears are vigorously pushing for the 57 cent mark. In as much as the market stalled for nearly two weeks at the 65 to 67 cent level, the 60 to 62 cent support may be stronger than it appears.

Yet, prices did collapse once the 66 cent level was breached. Thus, the trend remains lower.

The potential for a further collapse to 57 cents lies with Mother Nature and her blessing of the Indian crop and the U.S. Southwestern crop. Just as the current price slide began with early June rains that washed across 100 percent of the Texas cotton acreage and proved to be the gift that kept on giving, the Indian monsoon has finally arrived in style and is now making its daily swing across the world’s second largest cotton production region. While much of the primary cotton acreage was planted some 60 days late (and planting even continues), the crop forecasters have not reduced the production forecast.

While India is on its way to become the world’s largest producer either this season or in 2015, it is likely this season’s crop will be reduced due to the shortened growing season. Yet, we are all aware that the “normal” weather cycles over the past four years have been anything but normal. As previously noted, long range weather forecasts call for very “abnormal conditions” as we move forward.

Speakers at last week’s New York ICE Cotton Forum pegged the U.S. crop within the range of 17.2 to 17.6 million bales. A crop this big depends on favorable weather patterns not only in Texas, but across the entire U.S. Cotton Belt. Due to its late start, the condition of the Texas crop continues to lag behind the historical average. However, the Memphis Territory crop and the high-yielding Arizona and California crops have all advanced beyond the historical average.

Most weather models are predicting a cooler and wetter late summer and fall for the all-important Texas crop, which includes over half the acreage and an estimated near half of the U.S. production. Granted, the crop has the fruit potential for very high yields. But early comments from the weatherman are not conducive to harvesting that potential. Nevertheless, cotton varieties planted on the Texas High Plains and Rolling Plains are referred to as “storm proof” for a reason.

Since the majority of Indian cotton plantings only began receiving monsoon showers in the last two weeks, the key has become both the intensity and frequency of showers. Showers of one to three inches every three days are not uncommon and even occur daily. A similar pattern will be necessary for the coming month, and then weekly showers are required. The forecast is favorable. However, the crop is severely late, and Mother Nature must provide ample sunshine and heat units to make the crop.

Thus, after suffering through the decision by China to let its prices float at the world price (now about 80 cents to the mill), the market slipped further after the June rains in Texas and now is facing the late arrival of the monsoon in the Sub Continent. Thus, crop predictions are full of bearish news for the market, and the harvest of such a crop begets even lower prices between now and December. However, the probability of harvesting such a crop is at best very challenging, and each chink in the armor-protected crop by the weatherman will allow a slow, but increasing price level.

The adages “Darkest before the dawn” and “Low prices cure low prices” that folks like me use to find some cheer for the bulls do have a market meaning. Humans trade commodities, and humans, if anything, are emotional. Thus, the downside is always overextended. So too, the topside.

Prices should see an increase in August and again in January. Those dates surround a period that includes peak harvest and the traditional harvest lows in the market. The New York Cotton Forum speakers spoke in terms of aggressive use of the loan and holding the 2014 crop well into the summer of 2015 when prices are traditionally in an upswing. Yet, they stressed that the prudent use of the loan would also include the purchase of July 2015 call options.

 

Topics: ,

Leave a Reply

Market Analysis Stories
Market Analysis

Cotton Prices Settle, Poised to Climb Again

February 16, 2018

The market’s downside move appears to be over, ending a three-week downturn.

Market Analysis

Cotton Futures Nudge Higher, Despite Forecast for Rising U.S. Sowings

February 13, 2018

Cotton futures nudged higher, despite a much-watched survey on U.S. sowings showing a seven-year high, as the estimate came in

Market Analysis

Still Optimistic, but Fundamentals Do Rule the Market

February 3, 2018

Last week’s price correction was overdue, yet the market is still positive. But it’s best to remember that the simple fundamentals of supply and demand do rule the day.

Market Analysis

“Here We Go Again” as Market Preps Another Run

January 26, 2018

The price breakout above 80 cents continues to build its base in the very low 80s as it prepares for its next challenge to the 85 cent level.

OA Cleveland
Market Analysis

Could Quality Shortage Push Cotton to a Dollar?

January 19, 2018

Cotton’s roller coaster price trip is on, and it’s really just beginning. The steep incline is in front of us.

Market Analysis

Shurley: Things to Consider as Prices Climb

January 19, 2018

The reasons for better prices seem fairly obvious, but the strength of the current uptrend has been surprising. Looking ahead, growers need to keep certain factors in mind.

Market Analysis

Cleveland: The Bull Will Continue Charging

January 12, 2018

Multiple market factors are at work, with demand continuing to lead the way to higher prices. That means the bull market will keep charging ahead.

Around The Gin
Product News

The Seam Joins Field to Market

February 23, 2018

The Seam is now an affiliate member of Field to Market, hoping to link sustainability data with blockchain technology.

Product News

Bayer Shares the Risk with Cotton Farmers

January 26, 2018

Bayer offers replant, crop loss and yield protection to growers who plant FiberMax and Stoneville cotton seed.

Product News

Americot Adds New Sales Support in GA, KS and TX

January 23, 2018

Americot has expanded its sales support team in Georgia, Kansas and the Rolling Plains of Texas.

Product News

Indigo Offers Premium for Indigo Cotton Production

January 9, 2018

Indigo Ag has announced a new program that offers significant price premiums for U.S. cotton growers who contract to grow Indigo Cotton.

Product News

New Bayer Varieties Focus on High Yield, Adaptability

January 5, 2018

Bayer releases five new FiberMax and Stoneville varieties for introduction in 2018.

Product News

New PhytoGen TRiO Guards Cottonseed Investment

January 3, 2018

New PhytoGen TRiO seed treatment helps provide early season protection for young cottonseed from diseases, insects and nematodes.

Product News

Americot Adds Seven to Sales, Research Teams

December 20, 2017

Americot has added seven new sales and research associates to the company’s staff across the Cotton Belt.

Product News

Seven New Varieties in Deltapine Class of 18

December 11, 2017

Seven new varieties – including five Bollgard 3 XtendFlex offerings – join the Deltapine product lineup as the Class of 18.

Latest News
Market Analysis

Cotton Prices Settle, Poised to Climb Again

February 16, 2018

The market’s downside move appears to be over, ending a three-week downturn.

Market Analysis

Cotton Futures Nudge Higher, Despite Forecast for Rising U.S. Sowings

February 13, 2018

Cotton futures nudged higher, despite a much-watched survey on U.S. sowings showing a seven-year high, as the estimate came in

Market Analysis

NCC: Multiple Factors Offer Mixed Signals for Cotton

February 11, 2018

According to NCC economists, a few key factors will shape the U.S. cotton industry’s 2018 economic outlook.

Market Analysis

Talking Curveballs, Credibility and Carryovers

February 9, 2018

The February WASDE report served up a curve ball that caught the industry off guard. For the sake of USDA’s reputation, I hope they are correct.

Market Analysis

Still Optimistic, but Fundamentals Do Rule the Market

February 3, 2018

Last week’s price correction was overdue, yet the market is still positive. But it’s best to remember that the simple fundamentals of supply and demand do rule the day.

Market Analysis

“Here We Go Again” as Market Preps Another Run

January 26, 2018

The price breakout above 80 cents continues to build its base in the very low 80s as it prepares for its next challenge to the 85 cent level.

Market Analysis

Could Quality Shortage Push Cotton to a Dollar?

January 19, 2018

Cotton’s roller coaster price trip is on, and it’s really just beginning. The steep incline is in front of us.

Market Analysis

Shurley: Things to Consider as Prices Climb

January 19, 2018

The reasons for better prices seem fairly obvious, but the strength of the current uptrend has been surprising. Looking ahead, growers need to keep certain factors in mind.

Market Analysis

Cleveland: The Bull Will Continue Charging

January 12, 2018

Multiple market factors are at work, with demand continuing to lead the way to higher prices. That means the bull market will keep charging ahead.

Market Analysis

Cleveland: Don’t Ignore the Gift Horse. Feed the Market!

January 7, 2018

Don’t get caught looking a gift horse in the mouth. Cotton prices are at a profitable level for growers, and the market is asking to be fed.

Market Analysis

Shurley: New Year Cotton Policy Update

January 5, 2018

Recent legislative action in Congress could potentially bring cotton back under Title I commodity protection. Dr. Don Shurley explains the details.

Market Analysis

Shurley: December Report Seals the Deal

December 19, 2017

Based on the December USDA Crop Production numbers, any notion of this 2017 crop getting below 21 million bales seems unlikely at this point.

Market Analysis

It’s a Wonderful Day in Cotton’s Neighborhood

December 15, 2017

With apologies to Mr. Rogers…it’s a wonderful day in the neighborhood, and the cotton market has been mine.

Market Analysis

With Prices Rallying, It’s Time for “Significant Action”

December 8, 2017

The long-awaited rally above 70 cents appeared to mature this week. For those not already priced at 75 cents, it could be time to take significant action.

Market Analysis

Prices Push Above 70 Cents as Demand Remains High

December 2, 2017

Driven by tightening world stocks and led by an ever-increasing world consumption, cotton prices continue to move higher.