facebook_pixel

Shurley on Cotton: On the Ropes, But Trying to Hold On

By Dr. Don Shurley

???????????????????????????????

The past few weeks have not been kind to cotton.

Prices (December15 futures) have broken down through that important “trend of increasing support” line and have threatened to move lower. Some analysts believe we are headed to the upper 50s. But thus far, cotton has fallen mightily but trying is to hold on.

Today’s (August 12) USDA numbers may act like the referee stepping in to stop the damage just in time.

Cotton has been hit by a barrage of negative news lately, and one has to wonder how much longer prices can hang on. The January low close at 61.50 has been threatened. If prices can manage to stay above this January low, it will be a positive sign to say the least. Breaking through this “floor” could really get the bears roaring and send us even lower.

Today’s numbers don’t solve all of cotton’s ills, but they may keep the roaring bears at bay for now. The way this market has been going, we’ll take all the help we can get.

I have long said that one cure for falling prices is buying. It is thought that this move lower – now and if/when it happens again – may result in increased buying/exports. Perhaps that will provide the new support needed to keep prices from moving even lower and will eventually push prices a bit higher.

Prices will be driven by U.S. crop conditions and outlook, China and global economic concerns, and exports. The new USDA production and supply/demand numbers are a largely unexpected shock and should provide some boost and support for prices, even if it may be short-lived. December15 is up almost 300 points (almost three cents/lb) on the news.

USDA’s August estimates (also released August 12) are the first numbers for the new crop year based on an actual producer survey. The U.S. crop is now estimated at 13.08 million bales – down from the previous estimate of 14.5 million bales. Most expected the crop to be larger, not smaller, than 14.5 million.

U.S. acreage planted was reduced from 9.0 to 8.9 million acres and, more importantly, acres to be harvested was dropped 610,000 acres. Average yield is expected to be 795 lbs/acre – down from 819 lbs in the July estimate.

As expected, exports from the 2014 crop year were increased another 200,000 bales. There was a 100,000 bale reduction in the 2014 crop year beginning stocks and a 200,000 bales increase in the “unaccounted” number. So – in a bit of a surprise – U.S. beginning stocks on hand going in to this 2015 crop year were lowered a rather significant 500,000 bales.

This half-million bale decline, plus the reduced U.S. new crop estimate, cuts total available U.S. supply by almost two million bales.  But not all was good for prices, as expected exports for the 2015 crop year were lowered 800,000 bales. This reflects less available supply and concerns about China and their need for imports.

The U.S. average price of cotton for the 2015 crop was increased from 62 cents (a range of 54 to 70 cents) to 65 cents (a range of 58 to 72 cents).

The expected 2015 crops in both China and India were reduced. Total World production is now estimated at 109 million bales – down about 2.5 million bales from the July estimate. World usage is estimated at 114.65 million bales – up slightly from July, despite a half-million bale reduction in China’s expected use. World 2015-16 projected ending stocks were reduced three million bales, with China down a half-million bales from the July estimate.

There’s something inconsistent about the recent slide in prices and the increase in expected price range for this year’s crop. Today’s numbers, judging strictly by the market’s reaction, should provide some breathing room and a little relief from the bearish pressures. But there are still many unknowns and pitfalls. There are growing concerns about China’s economy, and, this week, the People’s Bank of China decided to devalue the Yuan.

For now, these numbers are like the referee stepping in and getting cotton off the ropes. But the fight continues. As we progress to harvest, prices will depend on any further revisions in the U.S. and foreign crops and the prospect for exports. Premiums for fiber quality are still expected to be good.

 

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

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.