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 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.