It looks as if the cotton market is frozen in time and has landed in the dental chair as it continues on its path to nowhere fast. Some teeth will have to be pulled in order to get the market moving again.
The trading range, in place since the fall of 2014, remains in force as prices continue to flirt with a breakout to the topside, only to fail in the 67.00 to 68.50 cent range. Too, the support area near 63 cents continues to offer a solid foundation of support. Therefore, the market cannot uncover any price volatility and is stuck in the mud.
Actually, the more recent support level near 64.00 cents appears to be firm enough to hold momentum to the downside. Thus, the narrow 62 to 68 cent trading range will remain the story in the cotton market.
Fundamental market news is unchanged over the past month, and price activity has followed suit, totally absorbed and content within its longstanding price channel. While there is a slight upward bias to the trading channel, each attempt to break above 69 cents has met with failure. Too, hedge pressure from growers appears too great to allow a break above 69 to 70 cents within the next two months.
The one change that is on the horizon is the export market. U.S. shipments will reach USDA’s 2014-15 estimate of 11.0 million bales during the week beginning July 26. Thus, USDA will have to increase its estimate of U.S. exports again. The only question that remains is will the increase be up 200,000 bales or will it be 300,000 bales higher? Yet, the market has already penciled in this change. Thus, there will be no surprises here.
The top end of the price range leaves U.S. cotton uncompetitive and allows Indian exports to grow, while the bottom end of the trading range brings U.S. cotton to the export table and leaves Indian cotton in the warehouse. Yet, at some point the trading range will be broken. International mills prefer U.S. cotton due to the reliability of delivery and fiber consistency. This quality advantage in the market can only go so far, as some spinning mills can increase their cleaning stages should prices begin to get out of line.
Speakers at this week’s New York Cotton Forum crossed a new bridge, as they all basically agreed to the same trading range. Typically there is always some disagreement, but not this year. All speakers felt the current trading range would remain in play into October. That appeared to the first opportunity for some price volatility to move into the market as, at that time, much more will be known of the success or failure of the Indian monsoon.
Too, the group built a case for a U.S. crop range of 13 to 16 million bales, citing weather scenarios as the key to 2015 production.
The group unanimously agreed that the cotton industry must revamp its marketing efforts to both the U.S. and the world consumer. Consumers must note their preference for natural fibers over chemical fibers.
The forum discussion and price projections can be viewed at agmarketnetwork.net.