October 28, 2022

• U.S. Stocks had a Mixed Week
• Mediocre Export Sales
• 45% of Cotton Crop Harvested

Cotton continued the recent downfall in prices with the nearby contract falling to 75.11 cents per pound, the lowest close since December 2020 and a decline of 229 points for the week ending October 27. Although cotton finished higher twice within the week, trading ranges were fairly wide, and concerns over demand and global economic news kept the market depressed. Open interest is now at 247,373 contracts, up 10,269 from the week prior and at the highest level since February. 

Outside Markets

U.S. stocks had a mixed week while searching for some direction amongst uncertainty between domestic and global news. After two consecutive contractions, the U.S. economy grew by 2.6% in the third quarter, slightly stronger than what was anticipated. The Federal Open Market Committee meets again next week to determine what will likely be another steep hike in interest rates. It is projected the Fed will raise rates by another 75 basis points, which would be its highest level in 15 years. Consumer spending increased by 1.4%, a slowdown from the quarter before, but also a sign the rising interest rates have not fully taken effect. The U.S. jobless claims came in at 217,000, up slightly from historic lows but still an indicator of a strong labor market. The U.S. dollar index fell to a 5-week low mid-week, which helped support commodities, before rallying after the release of the stronger than expected GDP report.

Export Sales

Mediocre sales of 68,400 Upland bales were made for the week ending October 20. Along with the net sales, cancellations came in at 35,800 bales, with most of the reduction stemming from China. China has been quiet on recent Export Sales Reports, but was back this week with a reduction of 49,900 bales. In addition to China, eight other countries also had cancellations. Although U.S cotton is limited, mill use and worldwide demand is still a concern within the market and can impact overall export sales, as was observed this week. The biggest buyers of Upland cotton this week were Pakistan (53,200 bales), Vietnam (36,200), and Taiwan (14,500). The 2023/24 crop year reported sales of 7,100 Upland bales. Lastly, Pima cotton saw a reduction of 700 bales for the week and shipments of 1,700 bales.  

Crop Progress and Weather

Soil moisture levels in Texas and Oklahoma remain dry, but have seen some reprieve from precipitation received earlier in the week. The ever-changing systems seen throughout Texas over the past month are set to continue into the next month. A front will move in over the weekend before dissipating and bringing warmer temperatures back mid-week. Above average rainfall is expected across Texas, Oklahoma, and Kansas the next week, which is always needed, but could impede harvest. The Mid-South and Southeast has been colder than usual but will see the same pattern of cold and warmer temperature in the coming week like the rest of the Cotton Belt. The warmer temperatures later next week will be welcome throughout to help continue harvest without further pause. Cotton harvest is progressing above the 5-year average pace of 39% with 45% of the crop in the U.S. having been harvested already.

The Week Ahead

Outside markets remain the biggest factor impacting cotton prices right now, and with the likelihood of an interest rate increase, cotton traders will be monitoring macroeconomic factors closely. Weather conditions, Crop Progress and Condition, and the Export Sales Reports will continue to provide insight as to what prices will look like for U.S. cotton. 

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 7:30 a.m. Central – Export Sales Report
• Thursday at 2:30 p.m. Central – Cotton On-Call