June 30, 2023
- Outside Markets Were Mixed Throughout the Week
- S. Export Sales Surprisingly Strong for the Week Ending June 22
- As of June 25, 95% of U.S. Crop has been Planted
With July futures all but gone, December futures will become the main focus in the months to come. Cotton specific news was light this week, but trading ranges were volatile. December futures were under pressure most of the week but managed to find support late in the week. A delayed Export Sales Report last week pressured prices going into the weekend. China returned from holiday on Monday, and rumors swirled that the Reserve may start selling to the domestic market, which weighed on U.S. prices. An improvement in U.S. export sales and expectations of a supportive Acreage Report helped boost the market at the end of the week. For the week ending June 29, December futures settled at 79.03 cents per pound, down just 112 points despite a volatile week of trading. Total open interest increased 3,478 contracts, bringing the total to 175,531.
Outside Markets
The story seems to be the same as last week for outside markets. Geopolitical uncertainty concerning Russia and the war in Ukraine captured headlines over the weekend. Major indexes faced pressure throughout the week from more hawkish Fed comments and global banking concerns. A revision in the first quarter Gross Domestic Product (GDP) and weaker initial jobless claims provided support that the economy continues to be resilient. In addition to the hawkish Fed comments, the U.S. Dollar also found support from weaker currencies across the globe. A stronger U.S. Dollar is typically not good for cotton, but cotton chose to ignore the strength in the Dollar.
Export Sales
U.S. export sales were better than expected for the week ending June 22. A net total of 125,600 Upland bales were sold for the 2022/23 crop year. The biggest buyer for the week was China, booking a total of 77,400 bales, followed by Vietnam with 37,500 bales, Taiwan with 4,400 bales, Pakistan with 4,400 bales, and Bangladesh with 4,400 bales. A total of 20,900 bales were canceled on this report, similar to what was reported last week. For the new crop year, 158,700 bales were booked. The combined total of sales was 284,300 bales, which the market looked at as a strong number of sales. A total of 225,200 bales were shipped for the week, which lags the pace needed to reach the USDA export estimate of 13.0 million bales. A net total of 3,600 Pima bales were sold for the 2022/23 crop year and 100 bales were sold for the 2023/24 crop year. Shipments of Pima totaled 15,000 bales, up substantially from the week prior.
Acreage, Weather, and Crop Progress
As of Sunday, June 25, the Crop Progress and Condition report showed that 95% of the U.S. crop had been planted, slightly behind the 5-year average of 98%. Despite the heat present recently, crop conditions appeared to have slightly improved overall. For the country, 6% of the crop is rated as “Excellent”, 43% as “Good”, 33% as “Fair”, 12% as “Poor”, and 6% as “Very Poor”. A total of 28% of the crop is squaring across the country, and 5% of the crop is setting bolls. A heatwave was present across much of the Cotton Belt. Temperatures should ease in the coming week, but rain would be welcome to reduce stress on the crop in all areas.
USDA released the annual acreage report today. While we do not typically report about action on Fridays, this report was highly anticipated and provides an essential update on expected acreage for the 2023/24 crop year. A total of 11.087 million acres of cotton are expected to be planted in the U.S. The acreage report showed Texas planting 6.1 million acres of Upland cotton, 570,000 acres in Oklahoma, and 170,000 in Kansas. Texas was lower than what the Prospective Plantings report held, but Oklahoma and Kansas showed an increase in planted acres. Including the 17,000 acres of Pima cotton expected in Texas, the total planted acres expected in the Southwest is 6.857 million acres, right under the initial estimate of 6.88 million acres.
The Week Ahead
Due to the July 4th holiday, next week will mark another holiday shortened trading week. Despite delayed reports, the usual roundup of weekly reports will continue to take central focus. Traders will continue to watch the weather and Crop Progress and Condition Reports closely, having had their planted acreage estimates recently revised.
- Friday at 2:30 p.m. Central – Commitments of Traders
- Monday at 3:00 p.m. Central – Crop Progress and Condition Report
- Friday at 7:30 a.m. Central – Export Sales Report
- Friday at 2:30 p.m. Central – Cotton On-Call