October 14, 2022

• Outside Markets Had Turbulent Week
• World Consumption Lowered 3.03 Million Bales
• Week’s Biggest Buyers: Pakistan, Bangladesh, and China
• 29% of U.S. Crop Harvested

Prices moved higher earlier in the week, with December 2022 futures closing up 189 points at 84.79 cents per pound on Friday. Monday prices exploded higher with several trading months locked at limit up with an advance of 400 points. Tuesday’s market action was tame compared to Monday, but was another positive day with December futures adding 63 points and closing at 88.86 cents. Then came USDA’s monthly WASDE Report on Wednesday that seemed to let the air out of the sales. Projected world demand had been reduced by 3 million bales and the market finished down 394 points at 84.92 cents. Open interest is sitting just above 232,000 contracts.

Outside Markets

Outside markets had a turbulent week like most commodities. The Dow Jones Industrial Average made a new 52 week low, but bounced 1,378 points from that low and closed at 30,038 for the week ending Thursday. The Bureau of Labor released its Consumer Price Index (CPI) for the month of September which showed an increase of 8.2% as compared to a year ago. Expectations for this figure were at 8.1% annual increase. The CPI was smaller than the August CPI of 8.3%. So, the figure released was not as good as expected, but was better than last month. We mention the CPI because it is a key indicator the Fed will use in determining how much to raise interest rates going forward. These interest rates have an impact on the U.S. Dollar, and that has an effect on how competitive U.S. cotton is in the export market.

WASDE

The WASDE Report released Wednesday provided a market-moving surprise for the third month in a row. World consumption was lowered 3.03 million bales from 118.63 to 115.60 million bales. Beginning stocks for the world were increased 470,000 bales and production was lowered 400,000 bales. Ending stocks for the world were raised 3.12 million bales from 84.75 million to 87.87 million bales. The October report made only minor changes to U.S. projections. Production was lowered to 13.81 million bales only 20,000 bales lower than the September report. U.S. exports were moved 100,000 bales lower to 12.5 million bales. Ending stocks increased 100,000 bales to 2.8 million bales. The October crop production report released by NASS showed Texas with the largest increase in production. Texas was raised 200,000 bales to 3.4 million bales versus 3.2 million bales in the September report. With Kansas production estimated at 170,000 bales down 60,000 bales from the previous month and Oklahoma production declining 30 thousand bales to 220,000 bales, cotton production for the Southwest region increased 110,000 bales to 3.84 million bales. Production estimates for the Southeast decreased 38,000 bales to 4.83 million bales, Mid-South production decreased 95,000 bales to 4.28 million bales, Far West production decreased 5,000 bales to 440,000 bales, and U.S. Pima production is estimated to rise 8,000 bales to 468 thousand bales.

Export Sales

For the week ending October 6, net sales of 144,800 Upland bales and shipments of 168,100 bales were reported. The biggest buyer this week was Pakistan, who booked 55,300 bales followed by Bangladesh 31,700 bales, China 14,400 bales and Vietnam 13,700 bales. Shipments of upland cotton totaled 168,100 bales with China receiving 39,700 bales followed by Vietnam 26,700 bales, Pakistan 25,500 bales, and Mexico 20,300 bales. Net sales reductions of Pima came in at 2,000 bales as Italy’s purchase of 1,000 bales was offset by India’s cancellation of 3,000 bales. Pima shipments were 800 bales for the week.

Crop Progress and Weather

Harvest is progressing throughout the Cotton Belt, with 29% of the U.S. crop being harvested, and the Southwest states showing 32% as per USDA’s Cotton Progress report ending October 9, 2022. USDA’s classing report showed just over 1.6 million bales classed in the U.S. through October 12, 2022. Lubbock has chances of rain over the weekend into early next week, which could slow some of the progress in some areas.

The Week Ahead

The Crop Progress and Condition Reports along with the Export Sales Report and the On-Call Report will play their usual role when looking at supply and demand. The Commitment of Traders Report will show the movement of non-commercial investors in the future’s market.

In the Week Ahead:

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