Old crop March futures hit just shy of $1.13 on Dec. 29 – up 294 points (2.94 cents per lb.). New crop December futures closed at 91.65 cents – up .35 cents.
We don’t want to and shouldn’t make too much of a single day activity. But look at what has happened just over the last three days this week – March 2022 was up 3.16 cents on Monday (Dec. 27), then down 2.23 cents on Tuesday (Dec. 28), then back up 2.94 cents.
The market is showing some potential (desire?) to improve higher, but this is also a very volatile environment. Since the Omicron-related breakout down on Nov. 26 and from the low of $1.037 on Dec. 2, we’ve now gained back over nine cents.
This increase to now over $1.12 could be met with some resistance and prices get beat back down a bit. Like I said, this market is volatile and difficult to pin down. If you’ve been waiting on recovery and an opportunity to recap some of your remaining crop, this could be a good opportunity from both a price and risk management standpoint.
New crop December 2022 futures is over 91 cents. Price expectations for the 2022 crop are likely to be high given that the 2021 crop has hit a high of $1.17 thus far. Pricing for 2022 will have to begin at some point. It’s just a matter of how much risk you want to take and when (at what price) you feel like you need to start.
Some producers, in hindsight, may feel like they started 2021 crop pricing too early/too low. Don’t beat yourself up and don’t let that factor in to 2022. Each year is different. and December 2022 is currently about 17½ cents higher than December 2021 was last year at this time.
March 2022 futures has improved – trending “cautiously up” thanks mostly to this week’s activity so far. This could change as quickly as it started. Going forward, near-term price direction depends on a mix of the following factors – some cotton-related, some not:
- The value of the dollar
- The stock market
- COVID-related news and issues
- End-of-year and first-of-year positions trading
- Weekly export sales and shipments
- Monthly USDA production and supply/demand estimates
- Supply chain issues
The weekly rate of export shipments has improved somewhat over recent weeks but still needs to improve more. Last week’s shipments were down slightly from the previous week. It’s still early, but we are running at roughly half the pace we need to be at. Sales have been down the past two weeks, but China has been a buyer and that’s a key ingredient regardless.
Demand fears caused by Omicron seem to have subsided and/or are partially overcome day-to-day or week-to-week by more positive factors. As we move forward, how this works out is unknown. COVID-related issues could easily and quickly come back into play and dominate. If demand can remain strong, that should support old crop, and price for 2022 crop will need to compete for acres.
Dr. Don Shurley is professor emeritus in the Department of Agricultural and Applied Economics at the University of Georgia, Tifton.
Source: Cotton Grower