facebook_pixel

Cleveland: Cotton Now in Clint Eastwood Mode

Right out of Clint Eastwood movies, the cotton market is following the script just as written last month, as well as his spaghetti westerns.

Cotton is now drenched in the Good, the Bad, and the Ugly as it watches a Fistful of Dollars disappear, all while just wishing and hoping For a Few Dollars More.

As I have often said, “The market is a tough taskmaster – she gives the test first, the lesson afterward.” Yet, for whatever reason, we seem to make her repeat that lecture time and time again. This week’s USDA February supply demand report only sharpened the bear’s claws as she prepares to maul through another level of price support, pushing for the 55 cent level, basis the nearby ICE contract.

Let’s hope the low 50s is not in store for this bear.

Staying in the “kick’em while they’re down mode,” why did it take so long to resurrect the market adage, “Short crops have long tails?” The price picture to be painted in the coming two months will get messier before it gets better.

The cotton market continues to follow the bearish path we suggested in January and will likely do so into the 2016 planting season, and probably longer. Presently, the market is moving lower in an attempt to judge the quantity of inferior Chinese stocks that will be dumped on the market, and to gauge how deep the New York ICE will fall before finding a bottom.

Typically, a lower market at this time of the season implies that the market is rationing land area to be planted to cotton (conversely, a higher moving market would be trying to buy more planted area). Yet, 2016 plantings are not on this market’s mind. It is all about Chinese intentions and the loss of demand. Yet, despite depressing oilseed and grain prices, world land area seeded to cotton will likely fall in 2016, and current U.S. grower intentions of seeding 9.1 million acres will likely fall below 9.0 million.

In its February supply demand report, the USDA reduced U.S. exports 500,000 bales, down to 9.5 million, and parlayed that reduction to ending stocks, increasing U.S. ending stocks to 3.6 million bales. The world 2015/16 cotton forecasts also included lower expectations of consumption and trade relative to last month. Consumption and imports were reduced for China, based on continued sluggish demand, and for Pakistan, where a slower pace of imports indicated reduced demand. World consumption was lowered 1.3 million bales, which included reductions for India and Brazil. With global imports nearly 1.0 million bales below last month, exports were reduced for Brazil, India, and Pakistan, in addition to the United States. Global stocks were forecast at just over 104 million bales.

The USDA analysis appears very volatile relative to China, Pakistan, India and the U.S. – the heart of the world cotton economy. Thus, major changes are expected in the coming months. Most notable are production estimates in India, Pakistan and China; imports by China; U.S. exports; and Indian exports.  In sum, the season-ending estimates, relative to the current month, are expected to reflect lower world stocks both inside and outside of China.

A number of years ago, a Louisiana man named Carville was highly instrumental in the election of a president by reminding everyone, “It’s the economy, stupid.” With apologies to James Carville, “It is demand, stupid…it is demand!”

In the absence of any dedicated industry effort to promote demand, cotton prices could fall to near or below the current world polyester price of 48 cents, before any turnaround in the market could be expected. It is demand, stupid! If I tell myself that often enough, then maybe I will catch on.

The signals that many thought they saw with respect to consumer tastes and preferences for cotton have entirely dissipated. Cotton is now formally classed as a luxury item by those who tabulate retail apparel numbers. Yet, the tough taskmaster is also a generous taskmaster. They will give us another chance to resurrect demand. There always is.

The question, however, is this – will we be smart enough to capitalize on that gift under the economics tree?

Give a gift of cotton today.

Topics: ,

Leave a Reply

Market Analysis Stories
Market Analysis

Shurley on Cotton: More Tariff Talk

April 9, 2018

The jury is still out on whether or not the “verbal war” between the U.S. and China will actually result in tariffs, and what the impact on cotton will be.

Market Analysis

Strong Demand, Drought Concerns Pushing Prices

April 14, 2018

Thanks to mill demand, shrinking quality stocks and increased drought concerns in the Southwest, cotton continues to post gains in spite of the selling pressure created by rolling positions to the July contract.

don shurley
Market Analysis

Shurley: This is Now USDA’s Number for Cotton

April 1, 2018

In my opinion, USDA’s March 30 Prospective Plantings report gets us much closer to what will eventually be the acres planted number.

Young Cotton Plant
Market Analysis

Cleveland: Start Pricing This Year’s Crop

March 24, 2018

Plant, plant, plant continues to be the motto. But it’s also time to add price, price, price to the discussion.

Market Analysis

Demand, Weather Concerns Driving Strong Trade

March 16, 2018

The market seldom sees a three-year price stream so favorable.

Market Analysis

Shurley: Pulling the Trigger on the 2018 Crop

March 16, 2018

Producing a cotton crop ultimately commits you to also sell the crop. But at what point do you say the price is “good enough?”

Market Analysis

Multiple Factors Driving Cotton’s Price Growth

March 9, 2018

The fundamentals of supply and demand – among other factors – continue to drive cotton prices toward the high 80s.

Around The Gin
Product News

FiberMax Honors One Ton Club Growers for 2017

April 17, 2018

The FiberMax One Ton Club recently honored 188 cotton growers who qualified for the club with their 2017 harvest results.

Product News

BASF Adds Engenia Spray Tool to Aid Applications

April 16, 2018

A new easy-to-use resource puts critical weather requirements for applying Engenia herbicide in one convenient location.

Product News

Reduce Timing Guesswork for Cotton Planting

April 16, 2018

Bayer’s online Cotton Planting Forecasting tool can help growers determine the optimal planting window to improve their chances at securing a strong stand.

Product News

Deltapine NPE Program Begins Class of 19 Evaluations

April 9, 2018

Nine Class of 19 variety candidates will be in growers’ fields this year as the Deltapine New Product Evaluator (NPE) Program kicks off its eleventh season.

Product News

Americot Expands Research and Sales Teams

April 5, 2018

Americot has added six new team members to the company’s research and sales staffs.

Product News

Greenleaf Introduces TipGuard Nozzle System

April 5, 2018

Greenleaf Technologies has introduced its new TipGuard System to protect spray tips from contact damage.

Product News

New BASF Reward Program for AR Growers Facing Dicamba Ban

March 27, 2018

BASF has revised its Grow Smart Rewards program to provide Arkansas growers alternative weed control solutions during the dicamba application ban from April 16 through October 31.

Product News

DuPont Vydate Products Fully Available for 2018

March 15, 2018

DuPont Vydate brand insecticide/nematicide products – including Vydate C-LV for cotton – will be fully available for sale and use during the 2018 growing season.

Latest News
Market Analysis

Strong Demand, Drought Concerns Pushing Prices

April 14, 2018

Thanks to mill demand, shrinking quality stocks and increased drought concerns in the Southwest, cotton continues to post gains in spite of the selling pressure created by rolling positions to the July contract.

Market Analysis

Shurley on Cotton: More Tariff Talk

April 9, 2018

The jury is still out on whether or not the “verbal war” between the U.S. and China will actually result in tariffs, and what the impact on cotton will be.

Market Analysis

Market Holds in Face of Tariff Rumblings

April 8, 2018

World consumption continues to support prices, but the mere suggestion of tariffs makes speculative fund managers nervous and increases market volatility.

Market Analysis

Cleveland: Prices Rally on USDA Acreage Report

April 1, 2018

USDA’s annual Prospective Plantings report pleasantly surprised the market, as seen by the price rally for cotton following the report’s release.

Market Analysis

Shurley: This is Now USDA’s Number for Cotton

April 1, 2018

In my opinion, USDA’s March 30 Prospective Plantings report gets us much closer to what will eventually be the acres planted number.

Market Analysis

Cleveland: Start Pricing This Year’s Crop

March 24, 2018

Plant, plant, plant continues to be the motto. But it’s also time to add price, price, price to the discussion.

Market Analysis

Demand, Weather Concerns Driving Strong Trade

March 16, 2018

The market seldom sees a three-year price stream so favorable.

Market Analysis

Shurley: Pulling the Trigger on the 2018 Crop

March 16, 2018

Producing a cotton crop ultimately commits you to also sell the crop. But at what point do you say the price is “good enough?”

Market Analysis

Multiple Factors Driving Cotton’s Price Growth

March 9, 2018

The fundamentals of supply and demand – among other factors – continue to drive cotton prices toward the high 80s.

Market Analysis

The Market’s Advice: Plant, Plant, Plant!

March 4, 2018

As world and U.S. ending stocks continue to shrink, growers have an opportunity to price the 2018 crop in the low 80s.

Market Analysis

Trucking Issues Limiting Timely Cotton Movement

February 24, 2018

Demand continues to exceed expectations. But new trucking regulations are putting a damper on timely movement of cotton and other ag products.

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.