facebook_pixel

Shurley on Cotton: Have Prices Reached Yogi’s Fork in the Road?

By Dr. Don Shurley

New York Yankee great Yogi Berra died this past week. One of the most famous of his Yogi-isms would be “When you get to a fork in the road, take it.”

Undoubtedly, cotton prices are at a fork in the road. Will prices be able to hold the 60-cent level and perhaps eventually recover to move higher or will prices erode further into the 50’s? No one is sure of the answer, but most seem to agree that until fresh/new buying appears, it is difficult to stop the bearish tone that has suddenly enveloped the market.

By “buying”, I mean an increase in buying of actual cotton or the purchase of cotton futures by investors, speculators, and others, signaling that enough folks believe cotton has finally gotten too cheap. Buying activity (demand) is needed and/or shock(s) on the supply side.

Prices (Dec futures) closed at 60.31 cents per lb on September 24. The 60-cent mark is a psychological mark, and prices, thus far, seem to be bouncing off the 60-cent level and hopefully attempting to establish a new floor of support.

Only time will tell. There are many negatives out there that currently pressure the market – the U.S. crop has gotten bigger (USDA Sept estimates vs. Aug estimates) and may get even bigger, World use appears to be weakening, the India crop is still an unknown, and there’s always the uncertainty of what is going on in China (economy, crop and imports).

If all these things work out negatively, prices could indeed find the 50’s. If, however, some of these worries turn out better than expected, prices could recover. What we hope will materialize as a “bounce” or consolidation at the 60-cent level would be the market’s way of saying enough is enough – for now.

Those that advocate that this market is definitely headed lower site the seasonal pattern of lower prices at harvest due to the delivery of supply and the widening of the basis.

In the past five years, December futures prices have trended down into harvest time four of those years (2010 being the exception). Thus far, 2015 is following a pattern similar to 2013 – prices relatively flat for most of the year before falling off late.

Shurley Graph Sept25

December 2013 futures were mostly in the 80’s. One of the uncertainties this year has to do with the fact that prices have been low and disappointing. I doubt that more than 15 to 20% of the crop has been contracted for harvest delivery. I sense that most of the crop may be headed to Loan. Unless contracted for harvest delivery, the only other cotton likely headed into the supply chain will be that cotton on which an LDP is taken – and then only if the cotton is then sold on the spot market.

In other words, I wonder if the normal harvest time seasonality of lower prices due to a glut of available supply is applicable. Prices may decline, but other reasons, like weak demand, may also dictate it.

The LDP available for the week beginning September 25 will be 7.39 cents per lb. This compares to 5.63 cents for the week ending September 24.

The Basis December in the Southeast is currently -50 points December for grade 41/4-34. The premium being offered for 31/3-35 is 325 points. For 31/3-35, taking the LDP and selling the cotton would result in total money received of 68.69 cents per lb, based on today’s price and available LDP.

Premiums for quality are expected to be good. Growers are encouraged to preserve both yield and quality by defoliating at the proper time and then harvesting in a timely manner.

 

Shurley is Professor Emeritus of Cotton Economics, Department of Agricultural and Applied Economics, University of Georgia

Topics: ,

Leave a Reply

Market Analysis Stories
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

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.

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

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.

Market Analysis

Shurley: October Numbers Not As Expected, But Prices Hold

October 18, 2017

USDA’s October production and supply and demand estimates are like apples – pick and choose and you’ll find some numbers you like...and some you won’t.

Market Analysis

Trying to Read the Market: Bearish, Neutral or Bullish?

October 13, 2017

After finding USDA’s October WASDE report initially bearish and somewhat neutral, cotton prices went mildly bullish thinking about stronger demand and the real size of the U.S. and foreign crops.