Solid Week for Cotton Prices, Exports
April 26, 2021 The cotton market was a bit spectacular this past week as the upward price trend took it higher. Of course, Chinese prices moved higher as well.
December futures traded to 85.36 and settled the week at 84.93 cents. The new crop December contract has now covered some 50% of the advance projected by the breakout of triangle pattern two weeks ago. Certainly, the technical projection is a fundamentally based response to the drought-stressed U.S. Southwest crop, as well as very good, continued demand.
Planting is making normal progress with some 15-20% of the crop planted.
The on-call mill sales versus on-call purchases ratio was more favorable than in last week’s report. Additionally, the same can be said of on-call sales based on the December contract. The trend continues to point to higher prices. With the inception of the sliding scale quota purchases by China, futures prices should be expected to drift higher. Our 88-cent objective for the December contract should be challenged before the end of May.
The lack of any significant moisture in the weather forecast for the U.S. Southwest continues to support market prices, as old crop will again challenge 90 cents. Price rationing of the limited available old crop supplies has begun again, and the 90-cent plus challenge is very reasonable. However, mills are beginning to back off as price rationing implies.
Cotton export sales for the week ending April 15 were a net 103,100 bales of upland, 6,700 bales of Pima and 42,800 bales of upland for the upcoming 2021-22 marketing season. Cancellations were minor, totaling only 8,500 bales of upland and Pima combined. China was the principal buyer with 39,000 bales, followed by Vietnam (25,600) and Turkey (22,400). Exports were very strong and included 313,200 bales of upland and 16,400 bales of Pima. Vietnam was the leading destination for upland with 92,500 bales, followed by Pakistan (61,400), China (38,800), Turkey (37,100) and Bangladesh (28,500).
All of these markets remain active in making offers for U.S. cotton. Those mills that had expected lower prices have begun hand to mouth buying to cover their needs. This is a testament to continued strong demand. The sales and shipment pace are on track to slightly exceed the USDA export estimate of 15.75 million bales.
Cotton Incorporated represented the U.S. cotton industry at Earth Day 2021 in several discussion groups with respect to cotton production and the environment. Cotton growers have reduced water usage some 82% over the past three decades while land use has gone down 31%. Green House gas emissions have fallen an estimated 30% percent while soil loss was estimated to be down 44%. The results were from a Cotton Incorporated Field to Market report.
The old crop July contract has now traded above its 40-day moving average. While that is very positive, it still needs to settle above the current 50-day average of 86.47 to confirm the old crop bullish tone. However, as we have harped for several months, December is a bit more bullish. It has now had three consecutive closes above both its 40-day and 50-day moving averages. This keeps us bullish in the trek to 88 cents and possibly higher.
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