PRICES CONFINED TO TIGHT RANGE, OPEN INTEREST INCREASES
- Spot Market Activity Slows
- Pace of Export Sales About Normal
- Outside Markets Face Political Volatility
- Crop Conditions Decline
Cotton futures stayed within a fairly tight range since Thursday, Sept. 19. Prices rallied Friday and Monday, climbing to 61.67 cents per pound before falling back toward 60.00 cents. Prices made a few attempts to fall below 60.00 cents, reaching an intraday low of 59.63 cents on Wednesday. However, late session buying seemed to hold closing prices above 60.25. The December contract settled at 60.28 cents per pound Thursday, 5 points lower on the week. Average daily volume was rather low all week, but open interest managed to increase 3,504 contracts to 234,295.
SPOT MARKET
Cotton growers sold 4,200 bales on The Seam this week, a decrease of 5,070 bales compared to the previous week. The average price of 53.59 cents per pound was 230 points lower than the previous week’s average, and the average premium of 3.25 cents over the CCC loan was 179 points lower. Bales offered for sale on The Seam increased 1,100 bales to approximately 89,700, including 26,800 bales of 2019-20 crop.
EXPORT SALES AND SHIPMENTS
Although export sales have been lower than many would like to see, the volume of new sales was within seasonal norms for mid-September, and shipments were actually higher than in most recent years. Net new Upland sales in the week ended Sept. 19 were 155,200 bales, and the top buyers were Pakistan (35,400 bales), Guatemala (30,300) Vietnam (19,800), Colombia (16,200) and even some to China (14,400). Outstanding (unshipped) sales total 6.96 million bales, which is less than last year’s 7.79 million bales at this point in the marketing year but is still very high by historical standards. Accumulated Upland exports, on the other hand, are now 1.60 million bales versus 1.21 million at this point last year. While rumors of more cancellations remain in the market as they have for many months, the export sales data is still on track for USDA’s current 16.5 million bale export forecast for the 2019-20 marketing year.
OUTSIDE MARKETS
Stocks were somewhat lower this week as the market dealt with U.S. political volatility. With a United Nations speech decrying China’s abuses in international trade, the announcement of an impeachment inquiry and the signing of a partial trade deal with Japan, investors and traders could hardly tell which way was up. In spite of everything, the U.S. Macroeconomic picture is still quite sound with the exception of business investment. By contrast, European economic news has been weaker for the past few weeks. The differential expectations and the fact U.S. Yields are still positive has kept the U.S. Dollar strong versus most other currencies. While that helps U.S. Importers, it puts a headwind on U.S. exports such as cotton.
CROP PROGRESS AND CONDITIONS
Crop conditions declined slightly last week as ratings in the Southeast, Oklahoma and Texas accounted for most of a two-point decrease in cotton rated good or excellent. Due to hot and dry conditions in most of the Cotton Belt, boll opening is ahead of pact at 64 percent versus a five-year average of 57 percent. Other than a few areas that have suffered untimely rains, harvest is progressing well. South Texas is mostly done, and Georgia is off to a great start. As of Sept. 22, USDA reported harvest at 11 percent, precisely the five-year average pace.
COTTON CLASSINGS
More than 800,000 bales had been classed at the Corpus Christi Classing Office as of Sept. 26. Qualities remain excellent with more than 85 percent tenderable for delivery on the ICE No. 2 futures contract. Going forward, qualities should remain good overall as more that 90 percent of the crop is off the stalk from the Rio Grande Valley through the Upper Coastal Bend area.
IN THE WEEK AHEAD
- Monday at 3:00 p.m. Central – Crop Progress and Conditions
- Thursday at 7:30 a.m. Central – Export Sales Report
- Thursday at 2:30 p.m. Central – Cotton On-Call
- Friday at 2:30 p.m. Central – Commitments of Traders