Texas Rains Mean Happy Growers, Slipping Market

It was and still is all about weather.

After a four year hiatus, West Texans can again declare, “It always rains by Memorial Day.” The million dollar rain came.

Cotton prices were on the defensive all week as prices moved lower by the day. Leading the price momentum shift lower was the potential rain forecast for the Southwest plains. Intraday forecasts during the week offered increased rainfall estimates, bringing about lower prices. Speculative fund managers, tuned to the forecasts and reading their technical charts, began taking profits and exited the market in mass. The only defense offered came from mill price fixations against on-call sales and actual mill buying.

However, speculative fund profit taking was just too extensive once Mother Nature’s nectar began to bless the western New Mexico and Texas plains. Cotton prices moved lower – some ten cents below the 96 cent highs recently observed. Too, excellent moisture conditions were forecast over the entire Southwestern cotton belt through the weekend – the multi-million dollar variety.

While this does not signal the end of the 100-year drought, it was the first step. Yet, the total absence of subsoil moisture will deem it necessary that a continuation of timely rains throughout the growing season will be necessary if the crop is to live up to its potential.

So, where does the market go from here?

First, the lower prices uncovered excellent demand. Unfixed mill call sales continue to be supportive to the market, but were reduced in the downturn. The price hemorrhaging should now be mostly contained, but prices could slip another three to four cents lower before all the damage is down.

The possibility for July to retrace back above 88 to 89 cents is now the first target. Mill demand has resurfaced as the dwindling level of quality is in great demand and with prices six cents below those of ten days ago – especially now that mill margins are very positive at current levels.

Earlier comments had suggested that a good rain would take at least three cents out of new crop, and that was the reaction of the New York December futures contract – down from 82-83 cents to the 79 cent level. One cannot overemphasize the importance of continued timely rains in Texas.

Yes, there is dancing is the streets now, but without moisture a month from now the dancing shoes will be covered with dust and wilting cotton. What happens tomorrow is more important than today. Nevertheless, we will continue the rain celebration for now.

The price damage has been done. Expectations are for stable to higher prices.

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.