facebook_pixel

Cleveland: Prices Seek New Floor Ahead of USDA Reports

Since sailing up to 68.11 cents on July 2, cotton futures moved south the remainder of the month and continued that pattern through the first week in August.

The latest December contract – after being down triple digits on August 6 as prices touched managed fund sell stops – broke below the long term 62.50 to 63.00 cent support level and then fell another 47 points on the weekly closing, settling at 61.79 cents.

The next supports lies near 61 cents, and then down to 58 cents.

We had long held that the 62 to 63 cent support would hold, but the market corrected us once again. We are reminded that all but one speaker at the recent New York Cotton Forum, sponsored by ICE and Cotton Incorporated, felt the 63-cent support level would hold. The one outlier was the Informa analyst that allowed for a quick, short-lived price drop to 56 to 58 cents. He may prove to be best soothsayer yet, as the market looks to be facing severe stress.

But then, the skies may be ready to brighten. If the market does move to the high 50s, such activity should be very short lived as it will not uncover any grower selling. In fact, the trade should be expected to defend the market at current levels. Such a scenario would allow for a price increase – albeit only a few cents.

Managed funds liquidated a solid chunk of longs this past week, and the grains seemingly have found some life after a month-long dive. That should be viewed as supportive for cotton prices.

Fundamental news will abound as the USDA August supply demand report will be released on August 12. The report will include a modified/updated USDA plantings estimate, an expected updated harvested acreage estimate, and the first objective crop survey of the year. Additionally, we will get USDA’s new take on U.S. exports, expected to be some 235,000 bales higher than the July estimate and dropping U.S. carryover down to 3.9 million bales.

The U.S. crop size is expected to be unchanged unless the revised harvested acreage is lower than expected. The report is not expected to be bearish. But it could be little more than neutral, as USDA may decide it wants to learn more of crop development around the globe. Nevertheless, the market is currently acting as if it wants to move slightly lower as harvest approaches – even though more than 95 percent of the harvesting is months away.

Harvesting has begun in the lower Rio Grande and easing up to the Southern Bend of Texas. However, those areas, as well the Northern Bend, have only limited acreage, and yields are also expected to be weak. Yet, it should be noted that little of that cotton is committed, and the vast majority of the production is expected to go in the CCC loan program.

Since August 1 – the date of the cotton yield objective survey – the U.S. crop has slipped backward according to USDA weekly reports. Of course, we will get another weekly report before the latest world supply demand report, so the yield survey will be somewhat dated by two full weeks. Thus, the USDA report will tend to overestimate the size of the U.S. crop. However, any overestimation – if there is any – will be slight.

Said differently, there is still potentially almost the “entire growing season in front of this crop.”

Personally, I feel the U.S. crop is 500,000 bales below the USDA estimate, and that 2015-16 exports should be increased to 400,000 to 500,000 bales. Additionally, the U.S. ending stocks for July 31, 2016 will eventually be lowered nearly one million bales below the current estimate. Likewise, the potentially record-setting Indian crop is slipping backward and will not be as large as the 2014 crop.

While the Indian monsoon has improved, there remain vast areas of cotton that have either received little moisture or less than half the moisture typically received by now. Granted, the monsoon season has another two months to go, which, with a very open fall, would allow for more cotton output.

The current weakness in the cotton market should be short lived, as growers do not have any incentive to price at current levels. A resurgence back to the 65 cent area should be expected.

Topics: ,

Leave a Reply

Market Analysis Stories
Market Analysis

Shurley on Cotton: More Tariff Talk

April 9, 2018

The jury is still out on whether or not the “verbal war” between the U.S. and China will actually result in tariffs, and what the impact on cotton will be.

Market Analysis

Strong Demand, Drought Concerns Pushing Prices

April 14, 2018

Thanks to mill demand, shrinking quality stocks and increased drought concerns in the Southwest, cotton continues to post gains in spite of the selling pressure created by rolling positions to the July contract.

don shurley
Market Analysis

Shurley: This is Now USDA’s Number for Cotton

April 1, 2018

In my opinion, USDA’s March 30 Prospective Plantings report gets us much closer to what will eventually be the acres planted number.

Young Cotton Plant
Market Analysis

Cleveland: Start Pricing This Year’s Crop

March 24, 2018

Plant, plant, plant continues to be the motto. But it’s also time to add price, price, price to the discussion.

Market Analysis

Demand, Weather Concerns Driving Strong Trade

March 16, 2018

The market seldom sees a three-year price stream so favorable.

Market Analysis

Shurley: Pulling the Trigger on the 2018 Crop

March 16, 2018

Producing a cotton crop ultimately commits you to also sell the crop. But at what point do you say the price is “good enough?”

Market Analysis

Multiple Factors Driving Cotton’s Price Growth

March 9, 2018

The fundamentals of supply and demand – among other factors – continue to drive cotton prices toward the high 80s.

Around The Gin
Product News

FiberMax Honors One Ton Club Growers for 2017

April 17, 2018

The FiberMax One Ton Club recently honored 188 cotton growers who qualified for the club with their 2017 harvest results.

Product News

BASF Adds Engenia Spray Tool to Aid Applications

April 16, 2018

A new easy-to-use resource puts critical weather requirements for applying Engenia herbicide in one convenient location.

Product News

Reduce Timing Guesswork for Cotton Planting

April 16, 2018

Bayer’s online Cotton Planting Forecasting tool can help growers determine the optimal planting window to improve their chances at securing a strong stand.

Product News

Deltapine NPE Program Begins Class of 19 Evaluations

April 9, 2018

Nine Class of 19 variety candidates will be in growers’ fields this year as the Deltapine New Product Evaluator (NPE) Program kicks off its eleventh season.

Product News

Americot Expands Research and Sales Teams

April 5, 2018

Americot has added six new team members to the company’s research and sales staffs.

Product News

Greenleaf Introduces TipGuard Nozzle System

April 5, 2018

Greenleaf Technologies has introduced its new TipGuard System to protect spray tips from contact damage.

Product News

New BASF Reward Program for AR Growers Facing Dicamba Ban

March 27, 2018

BASF has revised its Grow Smart Rewards program to provide Arkansas growers alternative weed control solutions during the dicamba application ban from April 16 through October 31.

Product News

DuPont Vydate Products Fully Available for 2018

March 15, 2018

DuPont Vydate brand insecticide/nematicide products – including Vydate C-LV for cotton – will be fully available for sale and use during the 2018 growing season.

Latest News
Market Analysis

Strong Demand, Drought Concerns Pushing Prices

April 14, 2018

Thanks to mill demand, shrinking quality stocks and increased drought concerns in the Southwest, cotton continues to post gains in spite of the selling pressure created by rolling positions to the July contract.

Market Analysis

Shurley on Cotton: More Tariff Talk

April 9, 2018

The jury is still out on whether or not the “verbal war” between the U.S. and China will actually result in tariffs, and what the impact on cotton will be.

Market Analysis

Market Holds in Face of Tariff Rumblings

April 8, 2018

World consumption continues to support prices, but the mere suggestion of tariffs makes speculative fund managers nervous and increases market volatility.

Market Analysis

Cleveland: Prices Rally on USDA Acreage Report

April 1, 2018

USDA’s annual Prospective Plantings report pleasantly surprised the market, as seen by the price rally for cotton following the report’s release.

Market Analysis

Shurley: This is Now USDA’s Number for Cotton

April 1, 2018

In my opinion, USDA’s March 30 Prospective Plantings report gets us much closer to what will eventually be the acres planted number.

Market Analysis

Cleveland: Start Pricing This Year’s Crop

March 24, 2018

Plant, plant, plant continues to be the motto. But it’s also time to add price, price, price to the discussion.

Market Analysis

Demand, Weather Concerns Driving Strong Trade

March 16, 2018

The market seldom sees a three-year price stream so favorable.

Market Analysis

Shurley: Pulling the Trigger on the 2018 Crop

March 16, 2018

Producing a cotton crop ultimately commits you to also sell the crop. But at what point do you say the price is “good enough?”

Market Analysis

Multiple Factors Driving Cotton’s Price Growth

March 9, 2018

The fundamentals of supply and demand – among other factors – continue to drive cotton prices toward the high 80s.

Market Analysis

The Market’s Advice: Plant, Plant, Plant!

March 4, 2018

As world and U.S. ending stocks continue to shrink, growers have an opportunity to price the 2018 crop in the low 80s.

Market Analysis

Trucking Issues Limiting Timely Cotton Movement

February 24, 2018

Demand continues to exceed expectations. But new trucking regulations are putting a damper on timely movement of cotton and other ag products.

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.