Cotton prices got slapped around all week despite the absolute void of any specific bearish cotton fundamental news.
The little fundamental news that surfaced ranged from bullish to neutral, with the bullish side scoring the most hits. Nevertheless, the cotton market was down on four of the five trading days and gave up all the gains it had made the prior week. A weekly gain of six cents was followed by a weekly loss of six cents.
Thus, prices have returned to the bottom of the trading channel – 61 to 62 cents, basis December. In fact, all contract months have seemed to find that same general bottom. Yes, I did say bottom, as it appears that the market is well supported at that level. It has been all year!
From time to time, I write about world currency switches and the general health of various world economies. Most of you send up very loud boos when I do. Yet, this trading week was all about the health of various economies around the globe and the associated shifts in currency values.
Raw cotton is globally traded in U.S. dollars. Yarn, cloth and finished goods are traded in the currency of the producing country, but, for the most part, are translated back to U.S. dollars because of the volume that is exported not only to the U.S. but to other countries as well. Thus, the uncertainty asset valuation due to changes in currency values, coupled with the ever dynamic economic rate changes in major countries, has kept the world financial markets in disarray for nearly two years (some say since 2002).
The misunderstanding, confusion and changes created by a major group of funds that are nervous and jittery at times, simply impacts all developed economies. These asset funds now comprise as much as half the money in any commodity market. These funds rapidly move exceptionally large amounts of funds in, out and maybe back during any given day. Until the majority of the world traders adapt to new uncertainties and a grasp a keener understanding of global currencies, the markets will continue to see major ripples of price and valuation uncertainty weave their way through the economic system.
There will be times when likely it would be best if all computers were turned off for a week just to give the markets time to digest the true information and cease to deal with uncertainty on the basis of perception. Again, as previously mentioned, “perception is reality” in the marketplace. It may not be correct. But in the market it is real…and the computers are not going to be turned off.
Currently, the world’s perception that the Chinese economy is crashing or heading for a crash is nothing, but just that. While the Chinese economy has slowed, the economic growth rate is more than twice that of the U.S. – nearly three times as much. So much for perception, except the Dow is down heavy and commodities are all much lower than just six months ago. Too, the slowdown is generally associated with the wealthy that are reeling in their penchant for showing their wealth.
The saga of the U.S. crop size continues. We commented last week on the crazy physiological development of much of the Texas crop, indicating it was planted very late, got too wet and then too cool just after emergence and did not jump out of the ground as crops can do. That was followed by too much rain and more cool weather. By that time, the plant was not committed to any of the fruit it had previously made. It sluffed that fruit off and then began anew, but without fruit at most locations.
Then, the miracle drugs (sunshine and heat) began to work, and the plants began to develop fruit. It continues to develop new fruit today, which is not good at all. Yet, in the meantime it has seen some cool temperatures that have not been helpful. While full of blooms now, the crop does face the potential of a cool, wet, early harvest – early enough that a number of the bolls will not mature.
Let’s just note another physiological without discussion – the normal time period from bloom to harvest for a given boll. That is, it is too late to expect to pick the blooms currently in the field. Generally, for cotton north of Amarillo, the last bloom that will be picked had to be on the plant by August 10-12. From Amarillo south to Lubbock, a bloom had to be on the plant by August 15-18 if a “pickable” boll was to be expected. South of Lubbock, it has been sometimes possible to pick a boll that bloomed by August 18-20. It is a maybe, but the Rolling Plains can possibly harvest a boll that resulted from a bloom as late as August 25 and it’s now the end of August.
Therein lies another problem.
The time period has passed to expect any of today’s blooms, or even last week’s blooms, to make a “pickable” boll on the High Plains. There were a ton of blooms on the High Plains last week, and another ton this week. While I hope every single one of them will be picked, do not expect any to make it to the basket, much less to the press. There will not be any flower counting by USDA field enumerators over the weekend. Only bolls on the plant will be counted.
The crop will need very timely heat units, sunshine, water and nighttime temperatures to grow a boll that is full of high quality seed and fiber. The real work for the cotton plant is just getting started.
I like the market higher.