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

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

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.

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.

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.