facebook_pixel

Cleveland: Prices Holding in Face of Softening Exports

The July lost 46 points on the past week and had a gain of only 28 points on the month. The year-to-date gain of 749 points suggests the fireworks are over.

First notice day for the July contract is now eight weeks away. Yet, while the technical perspective remains undefined and fundamentals are mildly negative, the bulls continue to push for higher prices.  The softening of exports, as bullish as they have been, are laying the foundation for price slippage.

May did climb to 80 cents just prior to its first notice day and keeps the hope alive for July to climb to 81-82 cents, but I am a doubter. Fundamentals will not push prices higher, but on-call positioning could create a small rally. The bears are in no position to take charge, but the market will slowly drift lower over the next two months.

As has been discussed for six weeks, the market is picking its top. New crop prices will continue to find support at 72 cents, but the flirtation with 75 cents continues. However, there will have to be significant unexpected weather difficulties to allow for much upside.

December futures were up 53 points in April and 508 points on the year. Longer term, December is expected to trend lower, but the market is exhibiting strong demand for both the 2017 and 2018 crops. Thus, cotton’s long term prospective remains very positive.

Export sales, again reflecting the May contract run to 80 cents, were off 50% from the prior week and 60% from the monthly average, and totaled a net of only 115,500 RB of upland and 5,900 RB of Pima. Sales for the next marketing year were 65,300 RB of upland and 7,500 RB of Pima. Shipments continued their very strong trend, as 302,400 RB of upland were exported along with 15,500 RB of Pima.

The May surge to 80 cents, basis New York, implies a textile-delivered CFR price above 90 cents and basically denies mills of operating incentive. Prices are simply too high for mills. Thus, the export rationing process has begun. There is no spigot that says “off.” But with prices at this level, the market generates its own spigot. Granted, there is only a very limited availability of high quality U.S. crop remaining for export.

It is noted that weekly exports sales of upland were at the lowest level since mid-September 2016. Concerns regarding losing export share due to changes in NAFTA rules made the rounds this past week. U.S. cotton enjoys an important million bale export market with Mexico, but cotton is very unlikely to be involved in any serious NAFTA discussion, as the economics are not there.

NAFTA accounts for less than 6% of the U.S. apparel market, and the trend is lower. Granted, both cotton and corn are very important aspects of agricultural trade with Mexico. Too, any loss of apparel activity in Mexico would not be re-shored to the U.S., but rather replaced from Asia. The U.S. would be expected to strongly protect its agricultural industries, but not private and non-agricultural textile investments in Mexico.

The ratio of July on-call sales to on-call purchases fell to 10:1 on the week, but is still wide enough to keep bullish ideas in the marketplace. Yet, with two months remaining for mills to make their fixations, time remains for them to work out of their pricing predicament. Too, with CFR prices to mills at 90 cents, what mill business there is will tend to be fixed price rather than on-call. This makes it easier for mills to get out of their on-call sales predicament.

However, the market will continue to experience triple digit trading days, both up and down. Again, the market is believed to be only debating its topping action.

Give a gift of cotton today.

Topics: , ,

Leave a Reply

Market Analysis Stories
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

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.

Around The Gin
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.

Product News

Crumpler Ironworks & Fabrication

November 1, 2017

Crumpler Ironworks & Fabrication is committed to providing the highest level of service, honesty and integrity, regardless of project size.

Product News

Delivering Proven Performance Across the Cotton Belt

November 1, 2017

Seed varieties, traits and crop protection products from Bayer deliver proven performance to growers across the Cotton Belt.

Product News

Growers Continue to Count on Americot and NexGen

November 1, 2017

Americot is dedicated to working with cotton growers throughout the Cotton Belt to provide elite performing NexGen varieties within the marketplace.

Product News

Deere Adds New Narrow Track Versions to 9RX Tractor Lineup

November 1, 2017

John Deere has added three new 9RX Narrow Track Tractors, expanding its lineup of high-horsepower machines.

Latest News
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.

Market Analysis

Shurley: Cotton Makes a Hard Landing

September 15, 2017

Following USDA’s September numbers, December cotton seems to have landed back in the 69-cent, pre-Harvey area.

Market Analysis

Higher Prices Holding as Winds Keep Blowing

September 10, 2017

An ill wind is blowing amidst the chaotic cotton trading wrought by back to back hurricanes slamming into two of the country’s major cotton producing regions. But which way does the wind blow?