facebook_pixel

Shurley: Prices Weaker but Remain Above Support

According to the latest USDA Crop Progress report, the U.S. cotton crop was 63% planted as of May 28 – essentially at the average for that date.

In the Southeast, planting progress is at a normal level, with exception of North Carolina and Virginia being behind 10-12 percentage points. In the Mid-South, planting is mostly ahead of normal, with exception of Missouri being behind 7 points. Texas was at 52% planted (normal), but squaring normal.  California was 72% planted compared to 96% normal.

As we proceed to complete planting and get fully into the growing season, growers will be looking for and accessing marketing opportunities to price or, in some fashion, take protection on some portion of expected production. I believe some growers are already quite a good ways along in their marketing; some are not. In either case, evaluating the outlook and making price risk management decisions will be crucial.

Prices have taken a weaker, more cautious tone in recent weeks. This is clearly seen looking at the December futures chart. At least for the present, it looks like there is good support at 72 cents. Further, the upper limit or resistance is at roughly 75 cents. In other words, given the forces and supply/demand factors as we think we know them at present, prices seem comfortable or likely to range between roughly 72 and 75 cents.

So, what are these forces and what will the market be keying on as we look and plan ahead? As growers consider further pricing opportunities, what can impact the direction prices take?

First of all, let’s acknowledge that we have seen 2016 crop futures increase from the 70-cent area last fall to 80 cents or better more recently. So, when making 2017 crop pricing decisions, it could be difficult for the grower to get that 80 cents out of his/her mind as a target for the new crop.

Is 80 cents possible for the 2017 crop? Anything is possible, because supply, demand, and policy factors are unknown and highly variable. I can also draw you a scenario for 68 cents. The more pertinent question might be at what price do you think it’s worth beginning to take protection and reduce the risk of getting something lower?

The following are some, but not all, of the factors that will come into play over the remainder of the growing season:

  • U.S. Acres and Crop. The 2017 U.S. crop is currently estimated by USDA at 19.2 million acres, based on March 31 planting intentions of 12.23 million acres. Change in cotton prices since that time are not likely enough to influence plantings, but an increase in plantings or likely crop size could weaken prices.
  • U.S. and ROW Ending Stocks. Stocks on hand in the U.S. at the end of the 2017 marketing year are projected to increase by 1.8 million bales. If the crop is bigger than currently projected, that number could grow. But, stocks in the rest of the world (ROW) are projected to decline by over 4 million bales.
  • China Continues to Reduce Stocks. China’s cotton production is expected to increase 3% this year. Its mill use of cotton is forecast to increase by 500,000 bales. Use will be 14 million bales more than production – deduct 5 million bales of imports and the result is a 9 million bale reduction in stocks.
  • World Use Improving. World use is forecast at 115.75 million bales – a 2.25% increase from the 2016 crop marketing year. If we are to sustain the current level of prices and higher, the big unknown is at what price will it begin to impact the use of cotton in mills and the substitution of manmade fibers?
  • U.S. Exports. Exports for the 2017 crop year are forecast down 500,000 bales from the 2016 crop year but still at a very good level. With a larger U.S. crop possible, exports must remain strong. Cancellations of 2016 crop export sales could push purchases into the 2017 crop year.

There’s optimism within the cotton industry right now and rightfully so. There are some policy challenges to be addressed, but demand is improving, stocks are declining, and prices have a chance to be relatively good for the second year in a row and perhaps longer. Evaluate 2017 marketing alternatives carefully to both achieve your price goals and also manage risk.

 

Topics: , , ,

Leave a Reply

Market Analysis Stories
Market Analysis

Was USDA Right? U.S. Crop Looking Bigger.

August 18, 2017

The U.S. crop is signaling that it is getting bigger. With nothing more than a good fall, the crop could climb as much as a million bales more than USDA’s August surprise estimate.

Market Analysis

USDA Report Stuns Market. Now, Wait for Reality.

August 14, 2017

USDA stunned the market with its August estimate of U.S. cotton production. But remember – history has shown consistent deviation between mid-summer estimates and final harvest realities.

Market Analysis

Technically Speaking, Pay Attention to Fundamentals

July 28, 2017

With prices holding in a three-cent range, it’s likely time to pay attention to what the market fundamentals and technicals are telling us.

Market Analysis

December Futures Prices? Ask Mother Nature.

July 23, 2017

Opinions differ on where December futures prices may go. But there’s no doubt that Mother Nature holds the key to forthcoming price activity.

Market Analysis

With Market Oversold, Is Bullish Return Near?

July 14, 2017

The cotton invert continues, as both the U.S. and Australian crops are oversold.

Market Analysis

Shurley: Prices Continue to Flounder in Lower Range

July 14, 2017

The July USDA crop production and supply and demand estimates report was not bad, but prices continue to show no improvement.

Market Analysis

Rain in India, U.S. Keeps Pressure on Prices

July 7, 2017

Beneficial rains in the U.S. and India kept pressure on cotton prices, as the December futures contract settled the past week unchanged.

Around The Gin
Product News

Maximizer Club Honors Top FiberMax Dryland Growers

August 17, 2017

The FiberMax Maximizer Club honored 121 growers who yielded at least 1,000 lb/A on dryland acres with FiberMax varieties in 2016.

Product News

Monsanto, Valent Expand Roundup Ready PLUS Partnership

August 7, 2017

Monsanto and Valent U.S.A. are expanding their crop protection partnership for the 2018 Roundup Ready PLUS Crop Management Solutions platform.

Product News

New Broadleaf Burndown Option Coming from Dow AgroSciences

July 31, 2017

A new burndown option for tough broadleaf weeds has shown excellent promise in trials across the Mid-South and Midwest.

Product News

Protect Cotton Potential from Weeds, Worms and Diseases

July 12, 2017

Southeast cotton producers say latest technologies from PhytoGen help protect yield and quality.

Product News

Monsanto “Troubled” by Arkansas Dicamba Decision

June 26, 2017

Monsanto has weighed in on the Arkansas Plant Board’s proposed ban of dicamba use in the state.

Product News

Drexel Adds Two Regional Sales Reps

June 16, 2017

Kyle Herring and David Davis have joined Drexel Chemical Company as regional sales representatives.

Product News

Dow AgroSciences Launching Enlist Corn in 2018

June 16, 2017

Following the launch of Enlist cotton, Dow AgroSciences will make Enlist corn commercially available for 2018 after receiving Chinese import approvals.

Product News

Transform Earns Section 18 Exemptions for Cotton, Sorghum

May 4, 2017

Transform WG insecticide has received Section 18 emergency use exemptions for use in cotton and sorghum in select states for the 2017 production season.

Latest News
Market Analysis

Was USDA Right? U.S. Crop Looking Bigger.

August 18, 2017

The U.S. crop is signaling that it is getting bigger. With nothing more than a good fall, the crop could climb as much as a million bales more than USDA’s August surprise estimate.

Market Analysis

Shurley: So Much for 18 Million Bales and Higher Prices

August 14, 2017

If USDA’s September numbers still validate a 20+ million bale crop, prices could slide. If not, the 68-70 cent level – or better – should hold.

Market Analysis

USDA Report Stuns Market. Now, Wait for Reality.

August 14, 2017

USDA stunned the market with its August estimate of U.S. cotton production. But remember – history has shown consistent deviation between mid-summer estimates and final harvest realities.

Market Analysis

Production, Weather Woes Boosting Market

August 4, 2017

Mother Nature’s recent Texas outburst was rough on cotton fields. But it was enough to boost prices back into the 70s.

Market Analysis

Technically Speaking, Pay Attention to Fundamentals

July 28, 2017

With prices holding in a three-cent range, it’s likely time to pay attention to what the market fundamentals and technicals are telling us.

Market Analysis

December Futures Prices? Ask Mother Nature.

July 23, 2017

Opinions differ on where December futures prices may go. But there’s no doubt that Mother Nature holds the key to forthcoming price activity.

Market Analysis

With Market Oversold, Is Bullish Return Near?

July 14, 2017

The cotton invert continues, as both the U.S. and Australian crops are oversold.

Market Analysis

Shurley: Prices Continue to Flounder in Lower Range

July 14, 2017

The July USDA crop production and supply and demand estimates report was not bad, but prices continue to show no improvement.

Market Analysis

Rain in India, U.S. Keeps Pressure on Prices

July 7, 2017

Beneficial rains in the U.S. and India kept pressure on cotton prices, as the December futures contract settled the past week unchanged.

Market Analysis

Shurley on Cotton: Where Did the Acres Go?

July 6, 2017

Dr. Don Shurley says the recent USDA Planted Acreage report did not deliver as expected, making times a bit confusing for producers looking to manage risk.

Market Analysis

Bulls Push Market on Heels of USDA Planting Report

July 5, 2017

Smaller than expected U.S. cotton plantings – and the potential smaller crop – caught the bulls’ attention in the market.

Market Analysis

Market Catching Its Breath After 10-Day Slide

June 23, 2017

After an unprecedented 10-day drop in prices, the market is trying to catch its breath.

Market Analysis

Mother Nature, Not Bulls, Managing the Market

June 16, 2017

Cotton prices took a big hit, and bullish signals are hard to find. Mother Nature is now in charge.

Market Analysis

Shurley: June Report Sends Mixed Signals

June 15, 2017

USDA’s June WASDE report contained some good news and some bad news. Overall, Dr. Don Shurley considers the report somewhat bearish.

Market Analysis

Report Softens Prices, Consumption Concerns Rise

June 9, 2017

USDA’s June WASDE report sent old crop and new crop prices lower at week’s end, as manmade fibers take aim at cotton.