facebook_pixel

Production, Weather Woes Boosting Market

The stage is being set for one heck of a play!

Mother Nature came back into play. And instead of boosting West Texas production with adequate moisture, she likely washed away some acreage and played havoc with plant growth, regrowth and, in many fields, brought about a delayed maturity schedule. This scenario – coupled with an expected early, cool and wet fall – has placed U.S. cotton production firmly in the category of “very questionable.”

Production/harvest problems in other major world production areas have only added to this.

Thus, the New York futures December contract pushed above the 69 cent price resistance level a week to ten days earlier than had been expected and now threatens the next level of resistance – just below 71 cents. Look for that hurdle to be scaled, as December attempts to stretch to 73 cents before setting up shop and looking even higher. The availability of high quality cotton for September-December delivery is growing tighter by the day, as mills scramble for cotton.

Going into next week’s August USDA world supply demand report, the U.S. crop is declining. Yet, as the lost acreage resulted from storms occurring literally on either side of August 1, it is unknown whether or not USDA will include the damage. Logically, one would think they would. But technically, they should not. So, the second guessing will continue as always, but with more than the usual questioning.

The drought stricken areas of Texas were drenched with 3-6 inches of rain rather than the beneficial 1-2 inch rain that was needed, causing plants to shut down and begin a several day hibernation in an attempt to restart a normal growth pattern. Thus, plant growth has been delayed for 1-2 weeks, and cool, wet growing conditions are getting closer and closer.

Despite the record yields many are enjoying in South Texas, the West Texas problems will probably doom U.S. production, setting it back to 18 million bales. Miracle of miracles – and a warm, sunny and dry fall into November – will allow the crop to get back on schedule. But, as stated: “Miracle of Miracles.” Either way, mills will be pressed to obtain cotton without paying up for it. The noose is tightening.

Adding to this misery, the Australian crop may be as much as 400,000 bales less than the current USDA projection. Thus, this significantly reduces the availability of high quality supplies needed to meet mills’ fourth quarter needs.

That same fire of price greed that burned so many mills last year is burning closer and closer. Some have already lost more than 3-4 cents, even after staring at a market begging for price fixations. Mills have bet very heavily on lower prices, and – just like last season – added to on-call sales. While such appeared to be a logical pricing strategy 2-3 months ago, we have noted the past two weeks that the strategy had begun to limit the market’s ability to move lower. Yet, mills continued to add on-call sales, as noted in the CFTC Commitment of Traders Report. Consequently, they will have to act with haste to not get caught in the same predicament as last year.

U.S. exports finished the 2016-17 marketing season increasing the phenomenal pace that had been set in the first five months of the season. It had been noted back in December that the export pace was 14.7 million bales. By the time the bales are counted next week, marketing year 2016-17 export U.S. exports may have climbed as high as 15.2 million bales, or between 600,000 to 700,000 bales above USDA’s estimate of less than 30 days ago.

As has been pointed out several times, mills have expressed the need for “immediate delivery,” as they were operating on a hand-to-mouth inventory basis and third quarter demand was bursting at the seams. Thus, the market run-up this week was associated not only with the production problems in the U.S. and Australia, but also with the realization that U.S. carryover was slipping to some 2.7 million bales.

Mother Nature could still add to the bagging and ties required for the U.S. crop with an open fall, but the odds for such are shrinking. Harvest basis should continue to be very strong, and now quality concerns will enter the picture. Mother Nature is on the verge on throwing a big price party – an event not even thought possible just three months ago.

Don’t get greedy. Be prudent. This market may have some legs a few weeks from now. The August highs are in front of us. So are the October highs. So are the December highs. Give the market 25% of your crop at 70.50 cents and another quarter at 73 cents. The rest of mine are out of here at 75 cents.

Give a gift of cotton today.

Topics: , ,

Leave a Reply

Market Analysis Stories
Market Analysis

Was USDA Right? U.S. Crop Looking Bigger.

August 18, 2017

The U.S. crop is signaling that it is getting bigger. With nothing more than a good fall, the crop could climb as much as a million bales more than USDA’s August surprise estimate.

Market Analysis

USDA Report Stuns Market. Now, Wait for Reality.

August 14, 2017

USDA stunned the market with its August estimate of U.S. cotton production. But remember – history has shown consistent deviation between mid-summer estimates and final harvest realities.

Market Analysis

Technically Speaking, Pay Attention to Fundamentals

July 28, 2017

With prices holding in a three-cent range, it’s likely time to pay attention to what the market fundamentals and technicals are telling us.

Market Analysis

December Futures Prices? Ask Mother Nature.

July 23, 2017

Opinions differ on where December futures prices may go. But there’s no doubt that Mother Nature holds the key to forthcoming price activity.

Market Analysis

With Market Oversold, Is Bullish Return Near?

July 14, 2017

The cotton invert continues, as both the U.S. and Australian crops are oversold.

Market Analysis

Shurley: Prices Continue to Flounder in Lower Range

July 14, 2017

The July USDA crop production and supply and demand estimates report was not bad, but prices continue to show no improvement.

Market Analysis

Rain in India, U.S. Keeps Pressure on Prices

July 7, 2017

Beneficial rains in the U.S. and India kept pressure on cotton prices, as the December futures contract settled the past week unchanged.

Around The Gin
Product News

Maximizer Club Honors Top FiberMax Dryland Growers

August 17, 2017

The FiberMax Maximizer Club honored 121 growers who yielded at least 1,000 lb/A on dryland acres with FiberMax varieties in 2016.

Product News

Monsanto, Valent Expand Roundup Ready PLUS Partnership

August 7, 2017

Monsanto and Valent U.S.A. are expanding their crop protection partnership for the 2018 Roundup Ready PLUS Crop Management Solutions platform.

Product News

New Broadleaf Burndown Option Coming from Dow AgroSciences

July 31, 2017

A new burndown option for tough broadleaf weeds has shown excellent promise in trials across the Mid-South and Midwest.

Product News

Protect Cotton Potential from Weeds, Worms and Diseases

July 12, 2017

Southeast cotton producers say latest technologies from PhytoGen help protect yield and quality.

Product News

Monsanto “Troubled” by Arkansas Dicamba Decision

June 26, 2017

Monsanto has weighed in on the Arkansas Plant Board’s proposed ban of dicamba use in the state.

Product News

Drexel Adds Two Regional Sales Reps

June 16, 2017

Kyle Herring and David Davis have joined Drexel Chemical Company as regional sales representatives.

Product News

Dow AgroSciences Launching Enlist Corn in 2018

June 16, 2017

Following the launch of Enlist cotton, Dow AgroSciences will make Enlist corn commercially available for 2018 after receiving Chinese import approvals.

Product News

Transform Earns Section 18 Exemptions for Cotton, Sorghum

May 4, 2017

Transform WG insecticide has received Section 18 emergency use exemptions for use in cotton and sorghum in select states for the 2017 production season.

Latest News
Market Analysis

Was USDA Right? U.S. Crop Looking Bigger.

August 18, 2017

The U.S. crop is signaling that it is getting bigger. With nothing more than a good fall, the crop could climb as much as a million bales more than USDA’s August surprise estimate.

Market Analysis

Shurley: So Much for 18 Million Bales and Higher Prices

August 14, 2017

If USDA’s September numbers still validate a 20+ million bale crop, prices could slide. If not, the 68-70 cent level – or better – should hold.

Market Analysis

USDA Report Stuns Market. Now, Wait for Reality.

August 14, 2017

USDA stunned the market with its August estimate of U.S. cotton production. But remember – history has shown consistent deviation between mid-summer estimates and final harvest realities.

Market Analysis

Production, Weather Woes Boosting Market

August 4, 2017

Mother Nature’s recent Texas outburst was rough on cotton fields. But it was enough to boost prices back into the 70s.

Market Analysis

Technically Speaking, Pay Attention to Fundamentals

July 28, 2017

With prices holding in a three-cent range, it’s likely time to pay attention to what the market fundamentals and technicals are telling us.

Market Analysis

December Futures Prices? Ask Mother Nature.

July 23, 2017

Opinions differ on where December futures prices may go. But there’s no doubt that Mother Nature holds the key to forthcoming price activity.

Market Analysis

With Market Oversold, Is Bullish Return Near?

July 14, 2017

The cotton invert continues, as both the U.S. and Australian crops are oversold.

Market Analysis

Shurley: Prices Continue to Flounder in Lower Range

July 14, 2017

The July USDA crop production and supply and demand estimates report was not bad, but prices continue to show no improvement.

Market Analysis

Rain in India, U.S. Keeps Pressure on Prices

July 7, 2017

Beneficial rains in the U.S. and India kept pressure on cotton prices, as the December futures contract settled the past week unchanged.

Market Analysis

Shurley on Cotton: Where Did the Acres Go?

July 6, 2017

Dr. Don Shurley says the recent USDA Planted Acreage report did not deliver as expected, making times a bit confusing for producers looking to manage risk.

Market Analysis

Bulls Push Market on Heels of USDA Planting Report

July 5, 2017

Smaller than expected U.S. cotton plantings – and the potential smaller crop – caught the bulls’ attention in the market.

Market Analysis

Market Catching Its Breath After 10-Day Slide

June 23, 2017

After an unprecedented 10-day drop in prices, the market is trying to catch its breath.

Market Analysis

Mother Nature, Not Bulls, Managing the Market

June 16, 2017

Cotton prices took a big hit, and bullish signals are hard to find. Mother Nature is now in charge.

Market Analysis

Shurley: June Report Sends Mixed Signals

June 15, 2017

USDA’s June WASDE report contained some good news and some bad news. Overall, Dr. Don Shurley considers the report somewhat bearish.

Market Analysis

Report Softens Prices, Consumption Concerns Rise

June 9, 2017

USDA’s June WASDE report sent old crop and new crop prices lower at week’s end, as manmade fibers take aim at cotton.