Recent bearish fundamentals have been just too much for the market to stand, and it all came crashing down this past week. Since the most recent recovery and “peak” at over 75 cents, prices (December 2024 futures) have now lost almost 4½ cents.
Prices lost almost two cents after the June 28 USDA Acreage report and followed through with another 2+ cents this past week. The July 5 close at just under 71 cents is the contract low and squarely puts us at the bottom end of price expectations for this year’s crop.
This price action is very concerning because the crop is planted, and growers are committed. Price may yet improve to previous levels, but the present weakness is still unprofitable (more unprofitable now than it already was) and concerning and the future unknown.
USDA’s Acreage report estimates that growers planted 11.67 million acres this year. This is 1.44 million acres or 14% more than last year. Also, this is almost 1 million acres more than what farmers said they intended to plant based on USDA’s Prospective Plantings report back in March.
This estimate of 11.67 million acres is considerably higher than most pre-report industry projections. Given the decline in cotton price since the February-March period – but because prices for alternative crops has also declined – it was highly uncertain but expected that actual acres planted might be around 11 million acres or less.
Recent export reports have not been particularly strong. In its June estimates, USDA lowered exports for the 2023 crop marketing year by 500,000. With roughly five reporting weeks remaining, shipments will need to average 286,600 bales per week to meet that estimate. But recent shipments are not on that pace, however. This could lead to USDA lowering their estimate again. As with the June number, this would again raise stocks carried into the 2024 crop year which begins August 1.
Higher than anticipated acres planted and higher carry-in could make a move to higher prices a tougher challenge – not impossible, but a bigger hurdle. Weather and crop conditions are also a factor and, ultimately, acres harvested.
As of June 30, 17% of the crop was rated poor and very poor compared to 14% the previous week; 50% was rated good to excellent compared to 56% the prior week. Now, we wait to see the path and intensity of Hurricane Beryl as it heads toward south Texas and rainfall amounts as it moves inland.
Dr. Don Shurley is professor emeritus in the Department of Agricultural and Applied Economics at the University of Georgia, Tifton.
Source: cottongrower.com