facebook_pixel

Cleveland: Quality Will Push Market in Due Time

After making new contract lows and surfing lower all week, cotton prices climbed back to 61 cents, basis the nearby December futures contract. (The weekly settlement was not timely printed on either of my two screens; thus, there may be a light pole down somewhere between Prague, Czech Republic and Mississippi. Ah, technology!)

The market’s week ending rally off the high 59 cent lows and back to 61 cents was a result of the blessing of the export market. It indicated that mills could just not pass up 60 cents and stepped up their buying. Yet, there was little other fundamental news on which to hang its hat.

The “crazy” rains in India and Pakistan were likely more harmful than helpful, being only neutral at best. Anticipated rains across the Mid-South and Southeast are expected to be very detrimental to the crop, as it is too late in the season to boost yield, and far too much cotton is open to escape with only mild quality damages. Unfortunately, this is one of those million dollar weather storms that costs growers a million, rather than adding to the pot.

Nevertheless, the cotton market continues to be plagued by the demand side of the price equation certainly more than I expected, or possibly appreciated. We have touched on the subject of a definite improved economy in the U.S. Yet, where I obviously missed that call was on the internal rate of savings in the U.S.

The reward from energy saving in the U.S. has essentially gone to saving rather than consumption. Demand for neither durables nor consumables has seen an appreciable increase. The U.S. consumer, instead, has elected to continue paying debt and adding to savings. No doubt this is admirable and will, in the future, represent a huge boost for consumables.

Too, long run economists applaud this trait in today’s consumer. However, it does leave today’s economy with a bit of a leech riding on its back. The primary indicator of the health of the U.S. economy is Wall Street’s Dow Industrial Average and the U.S. stock market. Both indicators, while okay, are just that – no better than okay. The economy exerts praises from consumers, but not to the extent that they are prepared to decrease their level of savings and invest more in consumer spending.

Thus, the typical and usual big engine that is required to boost economic activity – the U.S. consumer – continues to occupy only the back seat in economic activity. Until, he – or she, as it were – is prepared to express contentment with their passbook savings account will economic activity and, thereby, demand for cotton and other consumables reclaim the number one role as the leader of economic activity.

Housing starts – long a key indicator for measuring cotton demand – have had little impact the past two years. Yet, the relationship will return, but only once the savings goal is reached.

Nevertheless, U.S. cotton continues to be in the catbird seat as international mills are facing a decline in supplies available outside of China. Chinese cotton is not acceptable to the export market. It is the U.S. styles and descriptions that represent the desired cottons in the demand stream. The movement of quality continues, and the new seed varieties delivered by the seed companies has carved that niche for the U.S. grower.

The U.S. merchant must now step forward and reward the grower for producing the fiber quality the seed companies promised to the grower. Too, and don’t even think about saying, “Well, I can’t get a premium from the mill for it.” The merchant has to actually compete for quality fiber.

The future of U.S. cotton is quality, and the marketing stream must participate or move out of the way. The grower is due to step forward and, if necessary, demand the premium that is offered upstream.

The market continues to suffer far more than I anticipated, but the availability of suitable supplies is very limited, and the market must come to quality in due time. Cotton is seven to ten cents too cheap.

Topics: ,

Leave a Reply

Market Analysis Stories
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

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.

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.

Around The Gin
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.

Product News

Special Roundup Ready PLUS Incentives for Arkansas

December 7, 2017

Monsanto is offering a special Roundup Ready PLUS Crop Management Solutions platform in Arkansas for 2018 for growers planting XtendFlex cotton and Roundup Ready 2 Xtend soybean varieties.

Product News

Monsanto Sets 2018 Crop Protection Incentives

December 5, 2017

Monsanto will provide multiple tools, resources and products to help cotton and soybean growers maximize weed control in 2018.

Product News

Praxidyn’s Mixmate Named a 2018 AE50 Award Winner

November 27, 2017

The American Society of Agricultural and Biological Engineers has recognized Praxidyn's Mixmate portable ag chemical blending and recordkeeping system with a 2018 AE50 award.

Latest News
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.

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.