November 5, 2021

• Stock Markets Continued to Surge Higher This Week
• Export Sales Around Average for This Time of Year
• Harvest Continues to Progress
• November WASDE Report Coming Next Week

Cotton futures pushed to new highs this week. December futures continued last week’s rally on Friday and burst upward through their previous life-of-contract high at 116.48 cents per pound on Monday, when the December contract nearly settled at limit up. After another push at the open of Tuesday’s session that took December to 121.67 cents, which is the new life-of-contract high, prices fell back to a low of 115.75 on Wednesday. December futures settled at 116.46 cents on Thursday, gaining 273 points for the week. Daily trading volumes surged as prices broke to new highs. Volumes are expected to remain very strong over the next two weeks as Index funds roll forward their positions. Open interest decreased 2,518 contracts to 284,209.

Outside Markets

Stock markets continued to surge higher this week. Corporate earnings have continued to beat expectations, and the Federal Reserve’s announcement that it would begin tapering bond purchases this month did little to slow investors down. In fact, the S&P 500 made five consecutive all-time-highs since last Thursday. While a rally after the taper announcement runs contrary to expectations, it should be noted that the Federal Reserve continued to double down on easy money and its assertion that inflation is “transitory”. While extra bond purchases will slow to zero by next summer, the central bank confirmed its willingness to alter that plan at any sign of trouble and insisted that interest rates hikes are not appropriate before then. With an emphasis on not hiking interest rates, investors took the announcement as a “dovish taper” and were comfortable sticking to stocks.

Export Sales

Although slower than what we have recently seen, export sales were around average for this point in the marketing year. For the week ending October 28, exporters made new net sales of 139,100 Upland bales for the 2021/22 crop year and 20,600 bales for the 2022/23 crop year. The biggest buyers for the week were China (44,800 bales), India (24,300), Turkey (23,700), Vietnam (18,100) and Peru (13,700). Pima sales made a marketing year high of 31,800 bales, which means Pima sales are already over 70% of what the USDA expects for this season. As expected with the crop finally starting to come in at a regular pace, shipments rebounded to a normal seasonal level. Shippers exported a combined Upland and Pima total of 149,500 bales.

Crop Progress and Weather

Weather was more favorable for harvest in the eastern half of the Cotton Belt last week. While harvest is still lagging, it is only 3 percentage points behind the usual 48% pace for the week of October 31, which is a notable improvement from the 6 percentage points behind the average we’ve seen lately. We hope even more progress was made this week. Looking ahead, there is a high-pressure system moving across the southeastern states, letting the cold we had this week turn into warmer temperatures this weekend and next week. There may also be a low-pressure system moving in that could bring some precipitation and possible severe storms, but it will be hard to predict what is going to happen until early next week. We hope the weather is favorable so growers can continue to gain ground collecting crops.

The Week Ahead

There will be no shortage of activity next week. The largest of the commodity index funds will roll their positions over the next week, December options expire on Friday, and the November WASDE report will be released Tuesday. In the midst of all that traffic, traders will be busily handling producer and mill fixations against their remaining December on-call positions. Expect more volatility.

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
• Tuesday at 11:00 a.m. Central – November Crop Production and WASDE Reports
• Thursday at 7:30 a.m. Central – Export Sales Report
• Thursday at 2:30 p.m. Central – Cotton-On-Call