facebook_pixel

Higher Prices Holding as Winds Keep Blowing

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

After scattering most of the Upper Coastal Bend crop, Hurricane Harvey passed the destruction baton to Hurricane Irma. She is now blowing her way through the high yielding Georgia and South Carolina crops. Much of the increased Alabama acreage will also fall under her spell. The question as to how much acreage and yield will be lost to Irma remains a mystery, as reflected by the price volatility expressed in the New York ICE contracts.

Upwards of 800,000 bales were lost in the Coastal Bend of Texas to Harvey, with yield losses in Louisiana as high as 30 pounds per acre. The average loss to the Mississippi crop could be 10 pounds per acre, the same as for Arkansas. USDA will give us its idea on September 12 with this month’s supply demand report.

As Irma bears down on the Southeastern crop, it is expected that the Georgia and South Carolina crops will bear the brunt of the damage. Given that the impact of Irma is still in front of us, the best hope is that the average yield in those two states will be diminished by no more than 15 pounds per acre. Yet, it will likely be Thursday of this week before reliable loss estimates are available. If there is any good news, it is that Irma will not make landfall in the heart of a production region, as was the case with Harvey.

The USDA September production report will still exceed 20 million bales, despite the losses in Texas and other Gulf states. Yet, it is also doubtful, in my opinion, that the U.S. harvest will exceed 19 million bales – 1.5 million below the current USDA estimate. Much of the U.S crop is 21 to 28 days late, very unusual that such a large percentage is this late this far into the season.

As was said, the U.S. crop is loaded with fruit and looks to be headed for a bumper harvest. However, this is the first week in September, not the first week in August. Mother Nature has kept this crop a month behind all year, and now she is telling us to expect cool, wet weather for the remainder of the year – weather not conductive to finishing off a cotton crop.

Harvey, going onshore the last week in August, and now Irma, coming onshore the first week in September, will make the September crop production and world supply demand reports most difficult to read and decipher. If second guessing USDA wasn’t already an 80-hour work week, the next month will find USDA analysts second guessing themselves. The market will “develop” and trade its own data. Thus, the price volatility will continue.

The coming month will better define both the quantity and quality of the U.S. harvest. However, so much of the U.S crop is late that the November report will likely be the most accurate for the season. Therefore, traders will continue to bounce back and forth in the coming two months. The ten cent 65-75 cent trading range will remain in place, but now with a bias to the upside due to potential weather scares. The upcoming September production report could still be off as much as 1.5 to 2.0 million bales from the final 2017 crop production report, not released until June 2017.

U.S. merchants and international textile mills have already begun the hunt for high grade cotton. Asian mills are routinely expecting a large supply of 21’s and 31’s, and were shocked this week when told the high grade supply had all but evaporated. Too, those mills were spoiled by the excellent quality of the prior two years. Too, they were surprised to learn that staple lengths above 36 would likely be in short supply this season.

Thus, I again point to the importance of quality in the marketplace, and the difficulty the world – and particularly the U.S. – will have finding a home for abundance of light spotted and spotted grades left behind this hurricane season. Harvey left South and Central Texas cotton grades in shambles. Irma is threatening to do the same to most of Georgia, Florida, all of South Carolina and pockets in North Carolina.

Likewise, exports continue to remain strong, as current warehouse inventory contains high grade stocks. Vietnam and China continue as the best buyers. Too, the Chinese reserve sales continue to essentially sell out on a daily basis, and the available inventory is now just a shade above 26 million bales, after being some 39 million just one year ago.

It should be noted that textile mills crossed another line this past week. They established a record level number of on-call unfixed sales compared to on-call purchases. Thus, mills are once again caught very heavily leveraged to the position of expecting bearish price activity. Given that they have played their hand so early in the season – a season that will be hard pressed to draw large levels of suitable cotton to the Board – mills are very vulnerable to rapid price movement as respective contract month first notice day rolls around.

The 65 to 75 cent trading range continues.

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?