Shurley: It’s Not 90 Cents, But It’s Darn Close

In deer hunting, I have too often been guilty of letting a good one walk in hopes that an even better one would come along later. More often than not, that something better never happens.

After climbing into the 90s, prices (December futures) took a tumble to the 82-83 cent level before beginning to mount a recovery. That recovery was aided in part by USDA’s July 12 crop production and supply/demand numbers. Prices have again began to slip just a bit and currently stand around 87 cents.


I can’t possibly know where you are in terms of your 2018 crop marketing decisions – how much has been priced and how (cash, options, etc.) But, my guess is that cotton growers are in one of several situations right now:

At Least a Little Bit Early On. Some growers likely started pricing around 73 to 75 cents basis December. Depending on how much was done there, additional sales could have been added probably at around 80 cents.

Nothing Early, But Later. Some growers maybe held off or missed at the 75-cent level for whatever reason and then jumped in at around 80 cents. They have likely have done additional sales since then.

Got 90 Cents or Better on Part of It. I would hope that most growers, somehow, took advantage of the move to 90 cents or better. I could see, however, that if a grower was already fairly well out on the limb at 75 to 80 cents, that he/she may not have felt comfortable doing any more.

Missed 90 Cents. For whatever reason, they didn’t pull the trigger at 90+ and maybe has yet to even price anything. It’s hard to imagine being in the situation of not having done anything at this point, but I’m sure it’s happened.

We’re approaching August – in my humble option, always a critical time in the development of both the crop and price direction. USDA’s July numbers hopefully gave the market some added support, and the August estimate will be the first based on actual acres planted and yield estimates for each state.

In quick summary, in the July estimates:

  • The projected 2018 US crop was cut 1 million bales, due mostly to an increase in abandonment in the Southwest.
  • 2017 crop exports were increased 200,000 bales to 16.2 million, lowering carry-in stocks to the 2018 crop year.
  • 2018 crop exports were lowered 500,000 bales.
  • Projected world use for the 2018 crop year was raised 1.6 million bales, including a 1 million bale increase for China and 200,000 bale increase for both Bangladesh and Pakistan.
  • A reduction was made in China’s stocks – a 3.5 million bale adjustment, correcting what some observers have said has been needed for a while.
  • No adjustments from the June estimates were made in China’s production and imports for the 2018 crop year.

The U.S. crop is still uncertain, and we’ll see what the August numbers show. The July estimate accounted for a lower Southwest crop. Could the Southwest crop still get smaller? Yes, but some of that could be offset by larger crops in other states.

The market has rallied to recover roughly half of the fall from 90+ cents. The market has adjusted back up, and the July numbers were good from a price-impact and support standpoint. The likely range for prices in the near term is 82 to 90 cents.

We’re not at 90 cents, but the market is offering another good opportunity for additional pricing and/or price protection.