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: 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.

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: 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.

Around The Gin
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.

Product News

Monsanto Sets 2018 Crop Protection Incentives

December 5, 2017

Monsanto will provide multiple tools, resources and products to help cotton and soybean growers maximize weed control in 2018.

Product News

Praxidyn’s Mixmate Named a 2018 AE50 Award Winner

November 27, 2017

The American Society of Agricultural and Biological Engineers has recognized Praxidyn's Mixmate portable ag chemical blending and recordkeeping system with a 2018 AE50 award.

Latest News
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.

Market Analysis

Shurley: Demand Is Key to Price Strength and Stability

November 21, 2017

Demand is the key to cotton's future. We still have a way to go, but the outlook has certainly improved.

Market Analysis

U.S. Sales Booming to Meet Bullish Demand

November 17, 2017

Cotton appears to be caught in a battle between supply and supply. And that keeps prices well positioned to stay where they are.

Market Analysis

Increased Cotton Demand Moving the Market

November 11, 2017

A bullish supply demand report for November proves that demand moves markets. And demand for cotton has resurfaced.

Market Analysis

Cleveland: Yields, Quality, Consumption Still Rising

November 4, 2017

Reports of high yields, premium quality and growing consumption are keeping prices at the higher end of the trading range.

Market Analysis

India and Frost Combine to Prop Up Market

October 27, 2017

India’s plan to keep more of its cotton for domestic use, plus a potential freeze in West Texas, propped up the market during the past week.

Market Analysis

Bears Growling on Harvest and Demand Challenges

October 22, 2017

Although current trading activity represents a bearish price outlook, Dr. O.A. Cleveland still believes the 65 cent price support will hold. . .even though more experts are abandoning that position.