October 7, 2022

• Outside Markets Start New Quarter Off Best Since 2009
• Upland Cotton’s Biggest Buyers: Pakistan, Turkey, Bangladesh, and Taiwan
• 22% of U.S. Crop Harvested
• WASDE Release on Wednesday

Volatile and confusing seem to be the only words to describe the futures market this week. The macroeconomic environment and demand concerns were, once again, the main factors in the everchanging cotton market. Friday marked the end of September, and one of the biggest decreases in prices in a calendar month for the year. There was little change in the market until Tuesday, when prices went limit up for the day. After the limit expansion on Wednesday, prices then touched limit down before finishing on steep triple-digit losses. On Thursday, prices were up and down before finally settling down at 82.90 cents per pound, a decrease of 226 points for the week. Open interest is now sitting at 228,750 contracts, up 7,957 and the highest level reached since early April.

Outside Markets

Outside markets had a turbulent week much like commodities. After finishing the third quarter at the lowest levels of the year, outside markets started the new quarter off the best since 2009. The UN and WTO are worried that central banks are pushing the global economy into a recession by raising interest rates too quickly, which allowed a short-lived rally. After the gains early in the week, talks of a global recession, rising interest rates, and OPEC cutting oil production brought the market back down. The U.S. Labor Department reported jobless claims at 219,000, rising more than forecasted and showing possible economic weakness. The dollar index also trended down early in the week, putting less pressure on commodities, before retracing and finishing the week high.

Export Sales

The recent decline in prices meant the Export Sales Report was highly anticipated this week. Although sales increased compared to last week, only 121,200 Upland bales and 1,600 Pima bales were booked for the week ending September 29. The biggest buyers of Upland cotton this week were Pakistan (69,400 bales), Turkey (14,000), Bangladesh (12,100), and Taiwan (10,900). Net sales for the 2023-24 crop year came in at 48,500 Upland bales. Exports were healthy with a total of 209,600 Upland bales and 3,300 Pima getting shipped. It was expected that cancellations would be higher on this report, but they were about the same as last week with total reductions coming in at 23,400 bales.

Crop Progress and Weather

Harvest is progressing throughout the Cotton Belt, with 22% of the U.S. crop being harvested already. Assessment of the crop in the Carolinas from Hurricane Ian is still taking place, with degradation expected, but the rest of the cotton seemed to fare well in the Southeast. Besides some scattered showers expected throughout Texas in the next week, overall conditions are predicted to be warm and dry. Although the precipitation will help ease dry soils, farmers in West Texas are preparing to harvest and the warmer weather will be needed to continue.

The Week Ahead

From a fundamental point of view, nothing matters for cotton next week more than the release of the WASDE on Wednesday. However, the employment report and inflation data being released next week will also receive quite a bit of attention. The Export Sales and Crop Progress and Condition reports will play their usual role when looking at supply and demand. 

In The Week Ahead

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