Cotton is testing higher prices, as weather factors have severely restricted the availability of U.S. premium quality high grades. Too, world supplies are expected to be lower in the next world supply demand report.
There is an abundance of bales harvested, but still in the field, throughout the Mid-South. The Southwest has suffered from widespread quality damages, but yield has been little impacted, and the region will continue to have excellent yields. The Southeast is still counting its damage from Hurricane Michael – particularly Georgia, but also across the region. Much of the Cotton Belt remains saturated, and the warm weather has generated widespread regrowth.
The trading range has jumped to the 76.50-79.50 three-cent range, with dibs on pushing up to 81.50 cents before attempting to move higher.
The Secretary of Agriculture formally announced that there would be a second round of tariff adjustment payments to agricultural producers. He indicated that the details had not been worked out, but stated the details would soon be available. This was welcomed by the agricultural industry. Eligible growers are those that were eligible for the first round of payments and will include cotton, grain and oilseed farmers.
U.S. cotton exports continue to lag the year-ago sales, but shipments climbed on the week. Net weekly export sales of upland were 40,600 RB, with Pakistan, Turkey and Mexico being the primary buyers. China, South Korea and Vietnam all cancelled earlier orders. The South Korean cancellations were thought to be merchant-related, with the sales shifted to other countries because merchants had not been able to get the middlings 37’s and 38’s that the Korean mills needed. U.S. quality problems will likely lead to additional South Korean cancellations.
Export shipments totaled 139,200 RB – up some 3% from last week. Primary destinations were Vietnam, Mexico, China, Pakistan and Indonesia. Pima sales totaled 11,400 RB, and shipments were 5,100 RB.
On-call sales are aggressively mounting for the back months of March, May and July. The current indication is that this will make for a bullish back end of the 2018-19 marketing season, but only time will tell. Additionally, the current slow pace of export sales should add to the business in the back months.
Another bullish factor waiting in the wings is the growing expectation that the Indian crop could fall to as low as 27.5 million bales – some 1.2 million bales below the current USDA estimate. Some even place the Indian crop at only 27 million bales, but that, too, is wait and see just now.
With world ending stocks expecting to continue to fall, prices are sure to find support, but the trip to the low 80s will be slow and deliberate. More than anything else, the market needs to see some fresh mill demand, which has been slow to materialize as mills continue to take up cotton on a hand-to-mouth basis as the eventual U.S. crop size withers.
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