facebook_pixel

Cleveland: Market Yawns as It Closely Watches China

The release of the January supply demand report confirmed our long held idea that the world crop was considerably short of USDA projections. Yet, the market exhibited its disappointment that USDA’s crop reduction was not sharp enough. Despite a two million bale reduction in both world production and consumption, the market yawned and moved lower.

The troublesome world economic activity, declining oil prices and slowing business activity have left cotton demand in its wake. While job growth and some other economic indicators have blossomed, much of the services economy with its higher wages still flounders, and, with it, cotton demand.

Again, as a broken record, cotton prices can only drift marginally lower until demand surfaces. It is going to take more than a cold blast of that delightful breeze coming off the Canadian Rockies to push cotton prices higher. As refreshing that such a blast would be to the overheated U.S. cotton belt, it is a new blast of fresh demand from the world consumer that awaits higher cotton prices.

The market continues to consolidate near the 62 cent level as it pushes into 2016. Most of the price work has be just above 62 cents, but the weekly close just below 61.50 cents at 61.41 was a bit of a kick to the seat of the pants.

The market had been supported all week by seeming fresh price fixations, as well as new mill buying. The prior week’s exports had been strong, coming in at a net of 171,000 RB of Upland and 27,100 RB of Pima – a marketing year high. The primary buyers of Upland, as expected, were Vietnam and Turkey, the two largest consumers of U.S. cotton. Yet, actual shipments were only 79,400 RB – down over fifty percent from the prior week.

During the course of the past year the market has found excellent support at the 60-62 cent support level. But the current challenge, if not met soon, will allow prices to drift into the high 50 cent range – a near disastrous outlook for cotton pricing.

My suggestion, and a rather strong one at that, is that the 60 cent mark will hold. Demand, weak as it is, will pull prices back to near the mid-60 cent level.

In its January report, USDA lowered world production down to 101.6 million bales and dropped carryover to 102.8 million. World consumption was estimated at 110.9 million bales. U.S. production was marginally reduced some 100,000 bales to 12.9 million. The primary changes were based on smaller crops in Pakistan, down 800,000 bales (7.2 million); China, down 500,000 bales (23.8 million), and India, down 500,000 bales (28 million). Additionally, U.S. consumption was lowered 100,000 bales and was estimated at 3.6 million bales.

Market concerns now center on the potential decision by China to dump its low grade stocks on the local Chinese market, thereby limiting the amount of low count cotton yarns that would potentially be imported by China. There has been an unusually sharp increase in trading of the Chinese domestic futures market during the past month.

With this has been verbal speculation that the government was considering selling from the former “strategic reserve,” with the plan to sell “at any price.” This speculation appears to have gained a foothold and is now being broadcast by numerous sources inside the country. The price impact would reach across boundaries and throughout the world cotton economy, as it would distort yarn trade patterns, to say nothing of the spinning industry.

This potential activity has left the world cotton industry with a major fear of a negative price impact and has set the market back on its heels. How this plays out in the short term will keep the market in a defensive posture.

Further, in the absence of the U.S. Secretary of Agriculture taking action on the oilseed program, cotton prices will continue to struggle within the 61-63 cent area, even facing a battle to maintain 62 cents.

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

The Seam Joins Field to Market

February 23, 2018

The Seam is now an affiliate member of Field to Market, hoping to link sustainability data with blockchain technology.

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.

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.