facebook_pixel

Cleveland: Stagnant Prices and Demand Are Frustrating

Along with the world’s primary economic indicators, the cotton market took it on the chin all week. No question, my favorite commodity and I will do little more than stagger through the weekend.

Quality cotton continues to earn a rewarding premium. Yet due to this week’s loss in the futures market, net offers to the grower are less than a month ago. We continue to feel that those net-net premiums will return to even higher levels, but U.S. and world economic activity are destroying the recent build-up in consumer confidence.

The positive tone at the Beltwide Cotton Conferences in New Orleans was washed away by the very poor showing of the U.S. stock market and the Thursday announcement by the Secretary of Agriculture that he personally was having problems with the potential cottonseed program – even after virtually every commodity group indicated that cotton was the only commodity without a program, and that it was becoming clear that other commodities were suffering from the fact that a program did not exist for cotton.

The decades of history – written by both Democratic and Republican administrations – that it is less expensive to the government (the U.S. taxpayer) to buy a demand for U.S. agriculture than to pick up the tab for rebuilding rural and inner city America, seems totally lost in the Washington dysfunction.

Well, that is general economics, so let’s get back to cotton. Despite sharply declining world stocks – almost month by month as measured by USDA, and ditto world production – cotton prices are performing as if they want to move lower.

There are two variables in the development or discovery of a cotton price – supply and demand. And I am talking cotton here, not economics. Supply declines, demand is stuck in the mud, and price declines. Consumers, with their pocket books, are exhibiting an increasing dislike for cotton, and we are not reacting, other than throwing out excuses for not acting.

Market price does not care about excuses, or even excellent reasons/logic for not acting to build cotton demand. The market price is only interested in action and results. Will the action help you get a better price for your investment, your blood, sweat and gray hair? The answer is a simple yes or no – nothing more, nothing less.

A question was presented to me as part of a luncheon panel at the Beltwide. The question was something like this: “You give us these comments about cotton production that are very bullish for prices, so how high will prices go?”

My answer was that prices are going nowhere. There is no demand for cotton.

Cotton demand declines every day. The world population increases some 75 million every year, and cotton demand – documented – declines every month. One does not know me if they feel it does not hurt me deeply to say that consumers are voting with dollars a dislike for cotton. If one does not like my choice of words, then sugarcoat it as desired. Consumers are buying cotton goods at an ever decreasing rate. To deny such is simply to be the proverbial ostrich.

Staying with proverbs, growers reported at the Beltwide Conferences that plantings in 2016 would climb to 9.1-9.2 million acres, up from the 2015 planting of 8.6 million. Noting that, my personal estimate was, and remains, 9.3 million. Growers want to expand cotton plantings. More than a few are looking to come back after a few years off. Washington will have a lot to say about that, especially in the big state of Texas. A cottonseed program would push plantings as high as 9.7 million acres, reducing grain acreage a like amount.

The upcoming January supply demand report should reflect major changes in world production and world carryover. Production declines in Pakistan and India are in order, and world carryover will likely be down one million bales, on the way to being down 2.0 million by July, mostly based on the smaller Subcontinent crop.

World production will continue to drop in 2016-17, as will world carryover. Demand will remain stagnant.

Topics: ,

Leave a Reply

Market Analysis Stories
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

Still Optimistic, but Fundamentals Do Rule the Market

February 3, 2018

Last week’s price correction was overdue, yet the market is still positive. But it’s best to remember that the simple fundamentals of supply and demand do rule the day.

Market Analysis

“Here We Go Again” as Market Preps Another Run

January 26, 2018

The price breakout above 80 cents continues to build its base in the very low 80s as it prepares for its next challenge to the 85 cent level.

OA Cleveland
Market Analysis

Could Quality Shortage Push Cotton to a Dollar?

January 19, 2018

Cotton’s roller coaster price trip is on, and it’s really just beginning. The steep incline is in front of us.

Market Analysis

Shurley: Things to Consider as Prices Climb

January 19, 2018

The reasons for better prices seem fairly obvious, but the strength of the current uptrend has been surprising. Looking ahead, growers need to keep certain factors in mind.

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.

Around The Gin
Product News

The Seam Joins Field to Market

February 23, 2018

The Seam is now an affiliate member of Field to Market, hoping to link sustainability data with blockchain technology.

Product News

Bayer Shares the Risk with Cotton Farmers

January 26, 2018

Bayer offers replant, crop loss and yield protection to growers who plant FiberMax and Stoneville cotton seed.

Product News

Americot Adds New Sales Support in GA, KS and TX

January 23, 2018

Americot has expanded its sales support team in Georgia, Kansas and the Rolling Plains of Texas.

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.

Latest News
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.

Market Analysis

Still Optimistic, but Fundamentals Do Rule the Market

February 3, 2018

Last week’s price correction was overdue, yet the market is still positive. But it’s best to remember that the simple fundamentals of supply and demand do rule the day.

Market Analysis

“Here We Go Again” as Market Preps Another Run

January 26, 2018

The price breakout above 80 cents continues to build its base in the very low 80s as it prepares for its next challenge to the 85 cent level.

Market Analysis

Could Quality Shortage Push Cotton to a Dollar?

January 19, 2018

Cotton’s roller coaster price trip is on, and it’s really just beginning. The steep incline is in front of us.

Market Analysis

Shurley: Things to Consider as Prices Climb

January 19, 2018

The reasons for better prices seem fairly obvious, but the strength of the current uptrend has been surprising. Looking ahead, growers need to keep certain factors in mind.

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.