October 21, 2022
- Outside Markets Had Mixed Week
- Week’s Biggest Buyers: Pakistan, Egypt, and China
- Weather Volatile Across Cotton Belt
The cotton market continued in a downtrend the majority of the week, closing at lows not seen since April 2021. Trading was relatively sideways until Wednesday, when contract volumes spiked and December futures fell sharply before closing limit down. December futures finished the week at 77.40 cents per pound, down 739 points for the week. Open interest is now sitting at 237,104 contracts, an increase of 4,812 from the week prior.
Outside Markets
Outside markets had a mixed week between the release of economic data and global news. The U.S. jobless claims had a surprising fall to 214,000, well below what was forecasted, and showing that the labor market has yet to slowdown. Although existing U.S. home sales fell to a 10-year low of 4.71 million and mortgage rates are at 20-year highs, the Fed’s stance on interest rates remains hawkish. The economy is still showing little signs of slowing down, and the Fed is forecasting that rates are likely to end the year in the mid-4% range. The dollar also had a mixed week, which would usually help commodity markets, but the broader U.S. economic data outweighed what could have otherwise been beneficial.
Export Sales
The U.S. Export Sales Report held few surprises for the week ending October 13. Net sales of 84,500 Upland bales and 100 Pima bales were reported. The biggest buyers for the week were Pakistan (27,600 bales), Egypt (22,000), and China (10,100). Sales were down from what is typical at this point in the marketing year, but with little cotton left to market and waning demand, not much better was expected. An additional 4,400 Upland bales were booked for the 2023/24 crop year.
Crop Progress and Weather
October weather, much like cotton prices recently, has been volatile across the Cotton Belt. West Texas was cooler and wet at the beginning of the week and then had unseasonably warm temperatures the second half of the week. Although the moisture is always needed and welcomed, it could impede harvest in some areas. The warm temperatures are set to continue into the weekend before another front moves in bringing moisture along with it. The Mid-South and Southeast saw the first freeze mid-week but should warm up over the weekend, before ushering in another cold front. Warm, dry weather would be welcome across the entire Cotton Belt at this point so harvest can continue without pause. Cotton harvest is progressing steadily, with 37% of the U.S. crop having been harvested thus far.
The Week Ahead
Macroeconomics are still playing a vital role for cotton traders, as the mood in outside markets seems to matter more right now. Weather conditions, Crop Progress and Condition, and the Export Sales Report 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