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 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.