facebook_pixel

Shurley: Is This the Wake-Up Call We’ve Been Expecting?

Many years ago, a young man didn’t take his schooling serious enough and ended up spending some time at lovely Fort Polk, LA. That young man was me, and that was my wake-up call. It forever changed my life.

I believe the cotton market might be getting a wake-up call right now. We’ve been hinting that sooner or later the market might finally adjust to the different dynamics of the 2017 crop. The past week has certainly not been kind to cotton prices.

Beginning on May 5, new crop December futures prices declined four consecutive days, dropping a total of 242 points before finally eking out a small gain on May 12.

USDA released its May crop production and supply/demand estimates on May 10. After the report, December futures declined from near 73 cents to close at 72.33 cents – down 71 points for the day. Prices recovered to almost 73½ cents, but could not hold and ended the day with just a slight gain.

This is not an encouraging sign.

But, there is a level of support at 72 cents. Thus far, that floor has held, and hopefully it will continue to do so. It’s important to remember that the dynamics that will shape the 2017 cotton market are fluid and highly uncertain. As evidence, USDA projects the 2017 crop U.S. average price to be 54 to 74 cents.

The May report provided the first estimates for the 2017 crop. The crop is estimated at 19.2 million bales – up just over 2 million bales from the 2016 crop. Not really surprising here, given the expected 21% increase in acres planted – 19 million is about the number most folks have been anticipating as a starting point.

Projected exports for the 2016 crop year were raised from 14 to 14½ million bales. Worth noting, exports for the 2017 crop year are projected at 14 million bales – a respectable level, but below the 2016 crop year. The larger crop and reduced exports will raise U.S. ending stocks to a projected 5 million bales – 1.8 million bales more than this season.

We’ve said here all along that with a bigger crop comes the burden of needing higher usage to keep prices at a high/respectable level. It is possible, before it’s all over, that 2016 crop year exports could push even higher than 14½ million bales. This will reduce the carry-in to the 2017 crop year and help support prices.

As of May 4, export sales already totaled over 14½ million bales with 12 weeks remaining in the marketing year. The pace of sales has slowed, but that’s to be expected. Actual shipments total 11 million bales – 76% of the new USDA projection and on pace to meet or exceed the projection.

Elsewhere in the May report – and here are the uncertain dynamics in play – projected world use/demand for the 2016 crop year was revised up 600,000 bales; the India crop was lowered 500,000 bales; China mill use was raised 750,000 bales; China imports raised 300,000 bales; and 2016 crop year projected ending for China lowered almost 500,000 bales.

All in all, these are certainly not bearish numbers. Any “downers” in the report, if any, would seem to be associated with the upcoming 2017 crop year:

  • World production is projected to increase 7.34 million bales, with largest increases in U.S., India, China, and Turkey.
  • World use/demand is projected to increase 2.55 million bales – China up 500,000 bales, Vietnam up 600,000 bales, and Bangladesh up 400,000 bales.
  • The increase in production will outpace the increase in demand by almost 5 million bales, but use/demand will still be 500,000 bales more than production.
  • But, this compares to a 7.3 million bales demand more than production this season.
  • China is forecast to import 5 million bales, compared to 4.8 million this year and 4.4 million for 2015-16.
  • China ending stocks are forecast to decline by 9 million bales. Stocks are projected to decline 9½ million bales this season.

It’s difficult to see much bearishness in these numbers. Yes, production is expected to increase, but so is use. Production and use will be in much closer balance, but stocks are projected to continue to dwindle down. The U.S. crop, if realized as projected, will be big with no increase in exports expected, so U.S. stocks will increase. This could put a little pressure on prices.

Moving forward, the market will begin to focus on three things – U.S. crop plantings and condition; signs that use/demand is or is not showing continuing signs of recovery; and expected higher foreign production in key countries.

Is this our wake-up call? The actions of the past week would suggest so, but I also see some positives in the outlook. USDA’s suggested possible price range of 54 to 74 cents says anything is still possible. I’ll feel better if the support at 72 cents holds.

Topics: , ,

Leave a Reply

Market Analysis Stories
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

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: Storms and Other Unknowns for September

September 1, 2017

September could be interesting. Loss evaluation from Harvey will still be underway, and all eyes are watching Irma. How will it all impact USDA’s September report…if at all?

Market Analysis

Hurricane Harvey Leaves Several Market Scenarios

September 1, 2017

Following Hurricane Harvey’s rampage through East and Coastal Texas, cotton growers face several possible outcomes based on the level of damage to their fields.

Market Analysis

Market Watching for Harvey’s Impact on U.S. Crop

August 25, 2017

Hurricane Harvey blew prices to triple digit gains on the week. Now, the market will assess crop damage to see if the storm blew up crop projections as well.

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.

don shurley
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.

Around The Gin
Product News

Americot Adds Three to Regional Sales Force

September 20, 2017

Americot, Inc. has added three new regional representatives to the company’s sales force.

Product News

Enlist One Herbicide Added to Enlist System

September 13, 2017

Dow AgroSciences adds a straight-goods 2,4-D choline herbicide for additional tank-mix flexibility in Enlist crops.

Product News

Elevore Herbicide Registered for Burndown Use

August 30, 2017

Dow AgroSciences’ Elevore herbicide has received federal registration for use in fall and spring burndown programs for cotton, soybeans and corn.

Product News

Stoneville Legacy Club Honors Charter Members

August 24, 2017

The new Stoneville Legacy Club honored 129 growers who recorded average yields of 1,794 lbs/A or higher on at least 20 acres with Stoneville cotton varieties.

Product News

Improved Bollworm Management Expected in 2018

August 23, 2017

Southeast Texas cotton farmers should have new tools available in 2018 to better manage bollworms and other potentially damaging pests.

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.

Latest News
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?

Market Analysis

Post Harvey, 75 Cents Back in Cotton’s Sights

September 2, 2017

It remains to be seen if the greater loss from Harvey will be to cotton quantity or quality. But it likely means a wider trading range, with 75 cents now possible.

Market Analysis

Shurley: Storms and Other Unknowns for September

September 1, 2017

September could be interesting. Loss evaluation from Harvey will still be underway, and all eyes are watching Irma. How will it all impact USDA’s September report…if at all?

Market Analysis

Hurricane Harvey Leaves Several Market Scenarios

September 1, 2017

Following Hurricane Harvey’s rampage through East and Coastal Texas, cotton growers face several possible outcomes based on the level of damage to their fields.

Market Analysis

Market Watching for Harvey’s Impact on U.S. Crop

August 25, 2017

Hurricane Harvey blew prices to triple digit gains on the week. Now, the market will assess crop damage to see if the storm blew up crop projections as well.

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.