facebook_pixel

Shurley on Cotton: Prices Still Low, but Find Stability

By Dr. Don Shurley

Old crop March 2016 futures closed last week at 62.45 cents – up 1.04 cents for the week. After recently threatening the 61-cent area and even challenging 60 cents in late September, prices now seem to have found a little support and – dare we say – upward momentum.

The decline of the past two weeks has largely been due to global and China economic concerns and declining oil prices – all of which are impacting the stock market and other commodities.

The 61-cent area seems to be holding. While this is still far below what makes everyone happy, considering this market was once thought headed for the 50s, we take any good news we can find.

Longer term, prices still likely face resistance around 64 to 65 cents. If you have cotton in Loan or otherwise in storage, keep mindful that rallies to the mid-60s or higher likely represent good price risk management opportunities. In the Loan, also be mindful of MLG or equity opportunities. And remember, it’s the “total money” you are trying to achieve.

In addition to price movement, basis has been improving and fiber quality premiums have been strong. Basis in the Southeast is currently +175 March for base grade 41-4/34 and premium +325 for 31-3/35. This Southeast basis has improved +50 points in recent weeks. Premium for 31-3/25 is +275 points in the Mid-South and +150-200 points in Texas. This is USDA-AMS data.

Estimates of possible 2016 cotton acreage will begin to get attention over the next few weeks. The National Cotton Council estimate will be released during its February annual meeting, and USDA’s first estimate will be released on March 31.

Growers planted 8.58 million acres in 2015. Early guestimates for 2016 have been mostly 9.0 to 9.5 million acres, with some estimates below 9.0 and some closer to 10 million.

Shurley Graph Jan25 Web

December 2016 futures prices are currently close to 63 cents – a little lower than where December 2015 futures were last year at this time. Prices for 2016 could take a path similar to the 2015 crop. The 2015 crop never could break out of a range of mostly 62 to 66 cents. The factors in play for the 2016 crop year will have to break this rut.

The cotton marketing loan LDP provides protection from low prices. But low prices do not necessarily translate into low/lower acreage. The LDP/MLG acts to insulate the grower from low World and U.S. prices. When the World price (A-Index or Far East Price) falls below 72 cents, U.S. cotton futures will be about 67 cents, and the LDP increases as price declines.

Although cotton prices have remained disappointing and low, it is relative prices that are important. Compared to last planting season, cotton compared to corn is about the same. But when cotton is compared to soybeans, cotton has gained.

Despite disappointing prices, in addition to LDP’s, cotton has also benefited from a strong basis and good premiums for better fiber quality. There are no guarantees this will continue, but it is something to be considered. Newer/recently released varieties also offer both high yield potential and excellent fiber quality.

 

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: 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

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.

Market Analysis

Examining Loan Program and Rate Changes for 2017

October 9, 2017

Dr. Don Shurley provides an analysis of what changes in the marketing assistance loan for 2017 could mean for cotton growers.

Around The Gin
Product News

Bayer Looking for FiberMax One Ton Club Growers for 2017

November 16, 2017

Cotton growers who produce an average of 2,000 lb/A on 20 or more acres planted to FiberMax varieties in 2017 are eligible to be part of the 13th annual FiberMax One Ton Club.

Product News

Monsanto Delays NemaStrike for Additional Review

November 2, 2017

After finding cases of skin irritation, Monsanto is pulling its nematode seed treatment NemaStrike for further product review.

Product News

Intrepid Trio: Naturally Balanced Nutrition in Every Granule

November 1, 2017

Intrepid Trio contains three essential nutrients for cotton plants.

Product News

Save Time, Increase Efficiencies with Mixmate

November 1, 2017

Mixmate from Praxidyn is a precision chemical mixing system for small farms to large enterprises.

Product News

Crumpler Ironworks & Fabrication

November 1, 2017

Crumpler Ironworks & Fabrication is committed to providing the highest level of service, honesty and integrity, regardless of project size.

Product News

Delivering Proven Performance Across the Cotton Belt

November 1, 2017

Seed varieties, traits and crop protection products from Bayer deliver proven performance to growers across the Cotton Belt.

Product News

Growers Continue to Count on Americot and NexGen

November 1, 2017

Americot is dedicated to working with cotton growers throughout the Cotton Belt to provide elite performing NexGen varieties within the marketplace.

Product News

Deere Adds New Narrow Track Versions to 9RX Tractor Lineup

November 1, 2017

John Deere has added three new 9RX Narrow Track Tractors, expanding its lineup of high-horsepower machines.

Latest News
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.

Market Analysis

Examining Loan Program and Rate Changes for 2017

October 9, 2017

Dr. Don Shurley provides an analysis of what changes in the marketing assistance loan for 2017 could mean for cotton growers.

Market Analysis

Prices Still Sideways as Bearish Moods Grow

October 6, 2017

The market is watching weather and waiting for USDA’s October report. But bearish signs are starting to surface in some segments.

Market Analysis

Cleveland: Market in Hang On and Wait Mode

October 1, 2017

Cotton prices are holding without clear direction right now, as the market continues to watch USDA projections and harvest conditions for answers.

Market Analysis

Lower Chinese Stocks, Higher Polyester Prices Offer Market Hope

September 22, 2017

The market is holding steady, thanks again to China. Their Reserve auction has reduced cotton stocks and bumped consumption. And now, polyester prices are rising as the Chinese trim production.

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?