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

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

U.S. Sales Booming to Meet Bullish Demand

November 17, 2017

Cotton appears to be caught in a battle between supply and supply. And that keeps prices well positioned to stay where they are.

Market Analysis

Increased Cotton Demand Moving the Market

November 11, 2017

A bullish supply demand report for November proves that demand moves markets. And demand for cotton has resurfaced.

Market Analysis

Cleveland: Yields, Quality, Consumption Still Rising

November 4, 2017

Reports of high yields, premium quality and growing consumption are keeping prices at the higher end of the trading range.

Market Analysis

India and Frost Combine to Prop Up Market

October 27, 2017

India’s plan to keep more of its cotton for domestic use, plus a potential freeze in West Texas, propped up the market during the past week.

Market Analysis

Bears Growling on Harvest and Demand Challenges

October 22, 2017

Although current trading activity represents a bearish price outlook, Dr. O.A. Cleveland still believes the 65 cent price support will hold. . .even though more experts are abandoning that position.

Market Analysis

Shurley: October Numbers Not As Expected, But Prices Hold

October 18, 2017

USDA’s October production and supply and demand estimates are like apples – pick and choose and you’ll find some numbers you like...and some you won’t.

Around The Gin
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.

Product News

Special Roundup Ready PLUS Incentives for Arkansas

December 7, 2017

Monsanto is offering a special Roundup Ready PLUS Crop Management Solutions platform in Arkansas for 2018 for growers planting XtendFlex cotton and Roundup Ready 2 Xtend soybean varieties.

Product News

Monsanto Sets 2018 Crop Protection Incentives

December 5, 2017

Monsanto will provide multiple tools, resources and products to help cotton and soybean growers maximize weed control in 2018.

Product News

Praxidyn’s Mixmate Named a 2018 AE50 Award Winner

November 27, 2017

The American Society of Agricultural and Biological Engineers has recognized Praxidyn's Mixmate portable ag chemical blending and recordkeeping system with a 2018 AE50 award.

Product News

Bayer Looking for FiberMax One Ton Club Growers for 2017

November 16, 2017

Cotton growers who produce an average of 2,000 lb/A on 20 or more acres planted to FiberMax varieties in 2017 are eligible to be part of the 13th annual FiberMax One Ton Club.

Product News

Monsanto Delays NemaStrike for Additional Review

November 2, 2017

After finding cases of skin irritation, Monsanto is pulling its nematode seed treatment NemaStrike for further product review.

Product News

Intrepid Trio: Naturally Balanced Nutrition in Every Granule

November 1, 2017

Intrepid Trio contains three essential nutrients for cotton plants.

Product News

Save Time, Increase Efficiencies with Mixmate

November 1, 2017

Mixmate from Praxidyn is a precision chemical mixing system for small farms to large enterprises.

Latest News
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.

Market Analysis

Shurley: Demand Is Key to Price Strength and Stability

November 21, 2017

Demand is the key to cotton's future. We still have a way to go, but the outlook has certainly improved.

Market Analysis

U.S. Sales Booming to Meet Bullish Demand

November 17, 2017

Cotton appears to be caught in a battle between supply and supply. And that keeps prices well positioned to stay where they are.

Market Analysis

Increased Cotton Demand Moving the Market

November 11, 2017

A bullish supply demand report for November proves that demand moves markets. And demand for cotton has resurfaced.

Market Analysis

Cleveland: Yields, Quality, Consumption Still Rising

November 4, 2017

Reports of high yields, premium quality and growing consumption are keeping prices at the higher end of the trading range.

Market Analysis

India and Frost Combine to Prop Up Market

October 27, 2017

India’s plan to keep more of its cotton for domestic use, plus a potential freeze in West Texas, propped up the market during the past week.

Market Analysis

Bears Growling on Harvest and Demand Challenges

October 22, 2017

Although current trading activity represents a bearish price outlook, Dr. O.A. Cleveland still believes the 65 cent price support will hold. . .even though more experts are abandoning that position.

Market Analysis

Shurley: October Numbers Not As Expected, But Prices Hold

October 18, 2017

USDA’s October production and supply and demand estimates are like apples – pick and choose and you’ll find some numbers you like...and some you won’t.

Market Analysis

Trying to Read the Market: Bearish, Neutral or Bullish?

October 13, 2017

After finding USDA’s October WASDE report initially bearish and somewhat neutral, cotton prices went mildly bullish thinking about stronger demand and the real size of the U.S. and foreign crops.

Market Analysis

Examining Loan Program and Rate Changes for 2017

October 9, 2017

Dr. Don Shurley provides an analysis of what changes in the marketing assistance loan for 2017 could mean for cotton growers.

Market Analysis

Prices Still Sideways as Bearish Moods Grow

October 6, 2017

The market is watching weather and waiting for USDA’s October report. But bearish signs are starting to surface in some segments.

Market Analysis

Cleveland: Market in Hang On and Wait Mode

October 1, 2017

Cotton prices are holding without clear direction right now, as the market continues to watch USDA projections and harvest conditions for answers.

Market Analysis

Lower Chinese Stocks, Higher Polyester Prices Offer Market Hope

September 22, 2017

The market is holding steady, thanks again to China. Their Reserve auction has reduced cotton stocks and bumped consumption. And now, polyester prices are rising as the Chinese trim production.

Market Analysis

USDA Spins Market with Record Supply-to-Use Ratio

September 15, 2017

Hurricanes were but a mere hiccup for the world and U.S. crops. Instead, USDA spun some record-setting numbers that left the market dizzy.