JULY 27, 2018

MARKET FOCUSED ON SPECULATORS, TARIFFS AND CROP CONDITIONS

• Spec Longs Return to the Market
• Tariff Uncertainty Leads to Tight Range on Futures
• Texas and Oklahoma Crops Deteriorate
• Demand in 2018-19 Looks Good

The Commitment of Trader’s Report released last Friday showed that for the week ended July 17 speculators increased their long positions for the first time in several weeks.  Open interestincreased 5,653 contracts to 258,100.  Managed money showed a net increase of 1,444 contract, while producers/merchants increased their net short positions by 3,355 contracts.

USDA TO OFFER TARIFF AID TO FARMERS

Although neither the U.S. nor China seem to be backing down from their trade dispute, some positive news came out this week.  Secretary of Agriculture Sonny Perdue told reporters Tuesday that the administration plans to offer up to $12 billion in aid to farmers hit by tariffs on their goods.  The aid will come from a mix of programs overseen by the USDA.  December 2018 futures ranged between 88.59 and 86.10 cents per pound for the week as the tariff talks brought uncertainty.

CROP CONDITIONS DECLINE

With temperatures exceeding 100 degrees last week throughout the Southwest, the crop has fallen back some, according to the Weekly Crop Progress and Condition report issued Monday.  Texas showed 42 percent of the crop as poor or very poor, and 45 percent of the Oklahoma crop was rated poor or very poor. August rainfall will be a crucial to aiding yield potential for much of the area. In Kansas, however, only 4 percent was rated poor or very poor.

EXPORT DEMAND LOOKS GOOD

The U.S. Export Sales report released Thursday shows demand looks good heading into the 2018-19 marketing year with total sales commitments of 6.45 million bales as compared to 5.13 million bales a year ago.  The top three buyers of U.S. cotton for the 2017-18 marketing year are Vietnam, China, and Turkey.  Sellers of U.S. cotton will have to navigate the tariff situation with China, and a rocky economy in Turkey going forward. Meanwhile, the World Agriculture Supply & Demand Estimates (WASDE) report to be released on Aug. 10 will shed more light on U.S. production as yield estimates will be based on field surveys.

IN THE WEEK AHEAD:

• Crop Progress will be released Monday at 3:00 p.m. Central Time.
• The Export Sales report will be released Thursday at 7:30 a.m. Central Time.
• The CFTC Cotton-on-Call report will be released Thursday at 2:30 p.m. Central Time.
• The CFTC Commitments-of-Traders report will be released Friday at 2:30 p.m. Central Time.