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

With Market Oversold, Is Bullish Return Near?

July 14, 2017

The cotton invert continues, as both the U.S. and Australian crops are oversold.

Market Analysis

Rain in India, U.S. Keeps Pressure on Prices

July 7, 2017

Beneficial rains in the U.S. and India kept pressure on cotton prices, as the December futures contract settled the past week unchanged.

Market Analysis

Bulls Push Market on Heels of USDA Planting Report

July 5, 2017

Smaller than expected U.S. cotton plantings – and the potential smaller crop – caught the bulls’ attention in the market.

Market Analysis

Market Catching Its Breath After 10-Day Slide

June 23, 2017

After an unprecedented 10-day drop in prices, the market is trying to catch its breath.

Market Analysis

Mother Nature, Not Bulls, Managing the Market

June 16, 2017

Cotton prices took a big hit, and bullish signals are hard to find. Mother Nature is now in charge.

Market Analysis

Shurley: June Report Sends Mixed Signals

June 15, 2017

USDA’s June WASDE report contained some good news and some bad news. Overall, Dr. Don Shurley considers the report somewhat bearish.

Market Analysis

Report Softens Prices, Consumption Concerns Rise

June 9, 2017

USDA’s June WASDE report sent old crop and new crop prices lower at week’s end, as manmade fibers take aim at cotton.

Around The Gin
Product News

Protect Cotton Potential from Weeds, Worms and Diseases

July 12, 2017

Southeast cotton producers say latest technologies from PhytoGen help protect yield and quality.

Product News

Monsanto “Troubled” by Arkansas Dicamba Decision

June 26, 2017

Monsanto has weighed in on the Arkansas Plant Board’s proposed ban of dicamba use in the state.

Product News

Drexel Adds Two Regional Sales Reps

June 16, 2017

Kyle Herring and David Davis have joined Drexel Chemical Company as regional sales representatives.

Product News

Dow AgroSciences Launching Enlist Corn in 2018

June 16, 2017

Following the launch of Enlist cotton, Dow AgroSciences will make Enlist corn commercially available for 2018 after receiving Chinese import approvals.

Product News

Transform Earns Section 18 Exemptions for Cotton, Sorghum

May 4, 2017

Transform WG insecticide has received Section 18 emergency use exemptions for use in cotton and sorghum in select states for the 2017 production season.

Product News

EPA Approves Monsanto’s NemaStrike Technology

May 2, 2017

The EPA has issued registration for tioxazafen, a new nematicide from Monsanto that will be branded as NemaStrike Technology for nematode control and yield protection in cotton, corn and soybeans.

Product News

Indigo Partners Launched for In-Field Technology Testing

April 25, 2017

Indigo is launching Indigo Partners, a collaboration of 25 U.S. growers and agronomic experts to test agricultural technologies – including Indigo’s microbial seed treatments – during 2017.

Product News

UPI Adds New Herbicide Products

April 14, 2017

UPI has added two new herbicides to its portfolio of high quality crop protection products for the U.S.

Latest News
Market Analysis

With Market Oversold, Is Bullish Return Near?

July 14, 2017

The cotton invert continues, as both the U.S. and Australian crops are oversold.

Market Analysis

Shurley: Prices Continue to Flounder in Lower Range

July 14, 2017

The July USDA crop production and supply and demand estimates report was not bad, but prices continue to show no improvement.

Market Analysis

Rain in India, U.S. Keeps Pressure on Prices

July 7, 2017

Beneficial rains in the U.S. and India kept pressure on cotton prices, as the December futures contract settled the past week unchanged.

Market Analysis

Shurley on Cotton: Where Did the Acres Go?

July 6, 2017

Dr. Don Shurley says the recent USDA Planted Acreage report did not deliver as expected, making times a bit confusing for producers looking to manage risk.

Market Analysis

Bulls Push Market on Heels of USDA Planting Report

July 5, 2017

Smaller than expected U.S. cotton plantings – and the potential smaller crop – caught the bulls’ attention in the market.

Market Analysis

Market Catching Its Breath After 10-Day Slide

June 23, 2017

After an unprecedented 10-day drop in prices, the market is trying to catch its breath.

Market Analysis

Mother Nature, Not Bulls, Managing the Market

June 16, 2017

Cotton prices took a big hit, and bullish signals are hard to find. Mother Nature is now in charge.

Market Analysis

Shurley: June Report Sends Mixed Signals

June 15, 2017

USDA’s June WASDE report contained some good news and some bad news. Overall, Dr. Don Shurley considers the report somewhat bearish.

Market Analysis

Report Softens Prices, Consumption Concerns Rise

June 9, 2017

USDA’s June WASDE report sent old crop and new crop prices lower at week’s end, as manmade fibers take aim at cotton.

Market Analysis

Sleepy Market Watching U.S. Crop Progress

June 3, 2017

The cotton market snoozed all week, watching crop development and holding solid at 72-73 cents for new crop December.

Market Analysis

Shurley: Prices Weaker but Remain Above Support

May 31, 2017

As growers complete planting and move fully into the growing season, evaluating the outlook and making price risk management decisions will be crucial.

Market Analysis

Market Settling In as Old Crop Settles Out

May 31, 2017

On-call sales versus purchases are coming in line. Old crop July is done, and the open interest contract leader is now December.

Market Analysis

Fluctuations and Cancellations Create Interesting Week

May 22, 2017

Despite price fluctuations and export sales cancellations over the past week, the cotton market hangs tough as U.S. planting continues.

Market Analysis

Shurley: Is This the Wake-Up Call We’ve Been Expecting?

May 15, 2017

Market movement in the past few weeks may be the wake-up call the industry has been expecting.

Market Analysis

Market Holding, but Lock in Prices Now

May 15, 2017

Cotton’s recent price surge is likely not done yet. But, growers who have not priced their 2017 crop should do so soon before the market softens.