facebook_pixel

Market Holding, but Lock in Prices Now

Mad cow disease. Driven by mill on-call fixations, cotton prices shot more than five cents higher at week’s end, locking limit up.

Likely, the price surge is not done yet, as going into the week, mills needed to fix the price of some 4.5 million bales on the July contract – a record high. No longer can fixations be rolled forward. They must be fixed on the July contract, and that can only be accomplished by buying July futures.

Noteworthy, too, was that USDA increased its 2016-17 estimate of U.S. exports 500,000 bales to 14.5 million bales. Additionally, USDA lowered both U.S. and world carryover stocks for 2016-17 year.

It’s crunch time for mills, as first notice day for the July contract is June 26, just six weeks away. Mills are truly being squeezed, very tight (as my father would say, “tighter than Dick’s hat band”). As noted last week, the May contract eased above 80 cents, and we noted that where May went, then July was sure to follow.

Mill demand remains strong, but is weakening due to price rationing. Granted, those very, very few growers that have cotton to fix are pleased to see July challenging 83 cents. However, such a lofty price is damaging to the long term health of demand building, as it places cotton in more of the specialty fiber category by creating incentives for mills to continue their switch to the Chinese-produced polluting polyester fiber. Yet, that is a matter of consumer choice and corporate disdain for the environment.

The May supply demand report had been somewhat faded by traders and did not have any surprises. Higher U.S. exports were expected, as was the smaller carryover estimate of 3.2 million bales. World production for the 2016-17 year was estimated to be 106 million bales, with world consumption at 113 million. World carryover was lowered to 90 million bales.

In its first release of estimates for the 2017-18 marketing season, USDA estimated U.S. production at 19.2 million bales, domestic consumption at 3.4 million, exports at 14.0 million and carryover at 5.0 million bales.

World carryover was expected to drop for the third consecutive year, falling to 87 million bales – nearly three million below the current annual carryover. World production, responding to higher prices, was forecast to climb to 113 million bales, as all major producing countries were projected to have larger crops. World demand was forecast to rise to 116 million bales, an indication of expected lower and more competitive prices for cotton.

Stocks outside of China are expected to increase for the second consecutive year and is the basis for the lowering of U.S. exports. However, Chinese stocks were forecast to continue to fall due to the very successful Chinese policy of selling national reserve stocks, coupled with their policy of limiting the government purchase of new stocks. Nevertheless, the increased world production does not bode well for the international price prospects facing the 2017 crop.

Growers that have postponed any pricing of the 2017 crop are encouraged to do so on any movement back above 74 cents, and are cautioned that any move could be short lived and tied entirely to the process of fixations of old crop July on-call sales. Marketing savvy growers should give attention to selling 5-10 cents out of the money March calls, collecting the premium and applying that to the purchase of December puts as close to the money as desired.

While December futures can ride slightly higher on the strength of on-call sales, the risk of December trading down to the upper 50’s to low 60’s is very high.

Give a gift of cotton today.

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.