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

Market Remains Strong as The Limited Bows Out

January 20, 2017

The market consolidated gains of the past few weeks, just as The Limited – a primary supplier of cotton to women – closes its doors.

Market Analysis

Market Holds in Face of USDA Report Adjustments

January 16, 2017

From now likely into the mid-March trading period, the very bullish call sales ratio will continue to carry the ball for the bulls.

Market Analysis

Could the Market Drift into the Mid-70s? It’s Possible.

December 28, 2016

The 70-73 cent price range remains very firm, with a good chance that the market could drift into the mid-70s.

Market Analysis

Export Sales Drive Market as Potential for Explosive Growth Builds

December 19, 2016

U.S. export sales continue to lead trading. But conditions are growing for a potential “explosive fire” under the market.

Market Analysis

Shurley: December Numbers May Contain Hidden Stocking Stuffers

December 12, 2016

USDA’s December production and supply/demand estimates were as expected in some respects. But it also contained a few unexpected and positive surprises.

Market Analysis

Is Market Opening Window for “Made in U.S.” Revival?

December 12, 2016

USDA’s seemingly bearish December supply demand report failed to break cotton’s upside momentum, presenting a small window to potentially revive the “Made in U.S.” theme.

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.

Around The Gin
Product News

Enlist Duo Herbicide Registered for Use on Enlist Cotton

January 13, 2017

The U.S. EPA has registered Enlist Duo herbicide for use on Enlist cotton varieties, beginning in 2017.

Product News

Data Show Yield Gains from Indigo Cotton in 2016

January 9, 2017

Data collected from 2016 trials show that Indigo Cotton – a seed treatment based on naturally occurring, in-plant microbes to help increase water use efficiency – led to yield improvements on testing acres, including an 11% average yield increase in West Texas.

Product News

FiberMax and Stoneville Release New Varieties for 2017

January 9, 2017

Cotton growers searching to match the right variety the right field now have two new FiberMax varieties and two new Stoneville varieties to consider for 2017.

Product News

PhytoGen Rolls Out Seven New Enlist Varieties for 2017

January 5, 2017

PhytoGen is releasing seven new cotton varieties with the Enlist cotton trait and WideStrike 3 Insect Protection for the 2017 growing season.

Product News

Do You Qualify for the Stoneville Legacy Club?

January 3, 2017

Signup is now open for the new Stoneville Legacy Club, celebrating both the rich history of Stoneville and the generational wisdom of the growers who make 3-plus bales.

Product News

FiberMax Celebrates Growers Who Maximize Dryland Production

December 30, 2016

The new FiberMax Maximizer Club celebrates growers who produce great dryland cotton yields, and signup for the club is now open.

Product News

EPA Registers Engenia Herbicide from BASF

December 21, 2016

The EPA has registered Engenia herbicide for control of more than 200 broadleaf weeds, including glyphosate-resistant weeds, in dicamba-tolerant cotton and soybeans.

Product News

Growers Impressed with First PhytoGen WideStrike 3 Enlist Variety

December 19, 2016

The first growers to plant PhytoGen brand PHY 490 W3FE say the germplasm and technology combination helped them work smarter and increase cotton production.

Latest News
Market Analysis

Market Remains Strong as The Limited Bows Out

January 20, 2017

The market consolidated gains of the past few weeks, just as The Limited – a primary supplier of cotton to women – closes its doors.

Market Analysis

Shurley on Cotton: Opportunities in Improved Market

January 16, 2017

March futures have improved, and January is looking like a good month. The big question and the uncertainty is whether or not this will last.

Market Analysis

Market Holds in Face of USDA Report Adjustments

January 16, 2017

From now likely into the mid-March trading period, the very bullish call sales ratio will continue to carry the ball for the bulls.

Market Analysis

Bull Market Pushes Prices to Five Month High

January 9, 2017

Prices reached a five-month high, as cotton demand flexed its muscles and pushed the market up.

Market Analysis

Could the Market Drift into the Mid-70s? It’s Possible.

December 28, 2016

The 70-73 cent price range remains very firm, with a good chance that the market could drift into the mid-70s.

Market Analysis

Export Sales Drive Market as Potential for Explosive Growth Builds

December 19, 2016

U.S. export sales continue to lead trading. But conditions are growing for a potential “explosive fire” under the market.

Market Analysis

Shurley: December Numbers May Contain Hidden Stocking Stuffers

December 12, 2016

USDA’s December production and supply/demand estimates were as expected in some respects. But it also contained a few unexpected and positive surprises.

Market Analysis

Is Market Opening Window for “Made in U.S.” Revival?

December 12, 2016

USDA’s seemingly bearish December supply demand report failed to break cotton’s upside momentum, presenting a small window to potentially revive the “Made in U.S.” theme.

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.