June 03, 2022

• Macroeconomic Environment Remains a Mixed Bag
• Demand For Export Sales was Back in Full Force
• Southern High Plains Saw a Decent Amount of Rain

The holiday-shortened trading week made up for less time with more volatility. July futures put in a string of losses that saw the lead contract trade to its lowest price in five weeks on Thursday morning. Prices attempted several intra-day rallies during this week’s slide, but were unable to find support until bouncing off a low at 134.12 cents per pound. From that turning point, futures rallied 652 points during Thursday’s trading and finished at 139.11 cents, down 150 points for the week. December futures were pressured by speculative selling sparked by this week’s rainfall and had a worse week than July, settling at 120.10 on Thursday, down 423 points. Trading volumes were fairly heavy, and open interest gained 1,283 contracts to finish the week at 210,800.

Outside Markets

Stock markets started and ended the week with big advances that bookended choppier downward trading Tuesday and Wednesday. The macroeconomic environment remains a mixed bag. Energy and fuel costs continue to punish consumers around the world, so both the news that the EU would ban non-pipeline imports of crude oil from Russia and the OPEC+ announcement of increased production in July and August were big market movers.

With the Federal Reserve beginning to tighten the money supply by way of rolling assets off its balance sheet, it seems likely that monetary tightening will certainly cool down economic activity, but the market is still trying to figure out when and how deep the slowdown will be.

Export Sales

Demand for export sales was back in full force the week ending May 26. This week saw a record of 354,200 Upland bales getting booked for the 21/22 crop year and 109,100 bales for the 22/23 year. The biggest buyers of current crop were China (144,700 bales), Vietnam (87,100), Bangladesh (43,100), Turkey (33,000), and India (24,500). Shipments saw a marketing year high with 484,200 bales, which is far above the pace needed to hit USDA’s target of 14.75 million bales.

Weather and Crop Progress

A happy interruption in the Southwest drought pattern brought plenty of welcome rain to the Southern High Plains, eastern Panhandle, parts of the Rolling Plains, Southwest Oklahoma, and central Kansas this week. After missing out on showers earlier in the week, the Southern High Plains saw a decent amount of rain Thursday night. The storms have been welcomed the past week and have given a slight reprieve to drought ridden soils.  

The Week Ahead

Major market participants will remain focused on the wind-down of the July contract. Mills and merchants will focus on pricing open on-call positions, while Index funds will spend the next few sessions moving what is left of their July positions forward. On top of that, weather, planting progress, export sales, option expiry, and the June WASDE report will be keeping traders well occupied.

In the Week Ahead:

• Monday at 3:00 p.m. Central – Crop Progress and Condition
• Thursday at 7:30 a.m. Central – Export Sales Report
• Thursday at 2:30 p.m. Central – Cotton-On-Call
• Friday at 11:00 a.m. Central – WASDE
• Friday at 2:30 p.m. Central – Commitments of Traders