Shurley on Cotton: Prices Need Something to Grab Hold Of

By Dr. Don Shurley

If you don’t have a firm hold on things, sometimes it results in a fall. If you’re a deer hunter and have ever fallen out of a stand or slipped off the ladder going up or down, you know what I’m talking about. Luckily for me, I was about half-way down, and the fall was only about eight feet.


Cotton prices are still on a path to nowhere and just can’t seem to catch any momentum. Of course, like rungs on the ladder, positive factors have to be present in the supply/demand picture for the market to cease momentum. There has to be something to grab hold of.

Merchants/buyers will soon, if not already, switch to buying cotton basis the March futures. December closed last week at 61.68 cents/lb, with March at 61.99 cents. The Southeast basis for 41-4/34 is +1.00 cent and +3.25 cents premium for 31-3/35 (+4.25 December or +3.94 March).

The long-term trading range of mostly 62.50 to 66.50 has been challenged in recent weeks. A pattern of lower highs has developed and likely will act to pressure any movement in prices to the 64 to 65 cent area.

It appears that the shorter term range in prices (March futures) may now be mostly 61.50 to 64.50. Occasionally, good export sales reports have not been sufficient to move prices.

USDA’s November production and supply/demand estimates may offer some support for prices, but little in the way of price direction for the market. If anything, the numbers are likely neutral – maybe slightly bullish at best.

The U.S. crop estimate was lowered just slightly. Production for the Carolinas and Virginia was lowered 210,000 bales. No other changes were made for the U.S. Exports remain projected at 10.2 million bales.

Projected world production for the 2015 crop was lowered 1.75 million bales. China was lowered 300,000 bales, India was lowered 500,000 bales, and Pakistan was lowered 500,000 bales. All of these reductions were anticipated, thus not likely to move prices.

World mill use was revised down by 680,000 bales – 500,000 bales of which came in China, where use was lowered from 33.5 to 33 million bales. There was also a 150,000 bale reduction in Pakistan.

Shurley Projected Crop Year Nov16

World mill use (demand) is now projected at 111.59 million bales. This is up just slightly (1.14%) from the 2014 crop year. Use has trended up since 2011, but the recovery has been very slow and is concerning. In June, USDA projected 2015 crop year use at 115.3 million bales. Use is now projected 3.72 million bales lower, including China 3.0 million bales lower.

This slowdown has been a factor in the sluggish prices experienced.


Shurley is Professor Emeritus of Cotton Economics, Department of Agricultural and Applied Economics, University of Georgia