By Jeff Thompson, Autauga Quality Cotton 

The Ukrainian border crisis overshadowed everything last week, negatively influencing the actions of traders. Taking the stage with the world as an audience, President Biden is attempting to look less sleepy while Vladimir Putin is being his cagey KGB trained self. Will someone please tell the boys to play nice?

Fearful of the outcome, stocks fell to a 52-week low while cotton saw fund managers reduce their net long position. May cotton futures gave up 175 points to close at 121.16 while December lost two and half cents settling at 102.79, its first weekly decline in eleven weeks.

However, Friday’s triple digit bounce gives us hope the overbought condition has been corrected and another advance is soon to follow.

There is not much to say about the geopolitical standoff except to hope the current administration doesn’t adopt the philosophy of the one before to “never let a good crisis go to waste.” Nonetheless, this chess match will hang over the market like an anvil until diplomacy and cooler heads prevail.

Instead, let’s focus on the positives, cotton fundamentals, which given half a chance can drive prices higher. Foremost, traders got a glimpse to the potential size of the 2022 crop with the release of NCC’s planting intentions survey results. It revealed 11.9 million acres will be planted to upland cotton in the U.S., a 7.1 percent increase over 2021 plantings.

This is not surprising as high production costs and harvest capacity are thought to be limiting factors. Using a historical yield of 850 pounds per acre and applying an average abandonment rate of 19 percent, a 17.3 million bale crop can be expected. Aside from 2020, this would be the smallest crop in seven years and easily absorbed if current demand can be maintained.

NCC also forecasts exports to be 15.8 million bales as supply chain issues are resolved and world consumption is at a record high. This would result in ending stocks for 2022/23 marketing year falling to only 3.1 million bales, the lowest level in 20 years. With La Nina creating a rather ominous drought outlook for the Southwest, odds are this year’s crop will be even smaller.

Last week’s export sales were somewhat disappointing. Though current crop sales of 161,550 bales surpassed the weekly average needed to meet the export estimate, shipments of 274,630 bales fell well short. However, the fact shipments have held steady for three consecutive weeks lends encouragement logistical issues may be easing.

Also, with cotton trading over $1.20, the small volume of cancellations tells us price has yet to ratchet demand. The consumer’s penchant for buying continues with retail spending up almost four percent in January over the previous month, despite inflation.

Where to from here? With March futures off the board, a return to more normal trading patterns is expected. Today’s market has often been compared to the bull market of 2011 since both have moved eerily in sync. You will note a similar selloff occurred in 2011 when March futures expired before rebounding to a high upon May’s expiration.

Again, we feel the next few months will provide excellent pricing opportunities. Nevertheless, we all know $1.00 cotton rarely lasts for long. Looking at a 40-year historical price chart, bull markets have a life span at most of 25 to 30 months. Remain conscious of this since we’re currently in month 22 of this bull run.

Remember that March 15 is the deadline for making changes in your ARC and PLC payment choices. PLC has most often been the preferred selection for cotton. However, today’s high prices might warrant changes. Click here for an ARC/PLC decision making tool where you can enter your own farm data to determine which is best. Since there are crop insurance implications, consult your agent before making any final decisions.