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

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

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.

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.

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.