By Jeff Thompson, Autauga Quality Cotton 

It was the same song but second verse, as cotton traded wildly for yet another week. Hitting daily trading limits both up and down, prices swung from a high of near ninety cents to a low of eighty-two. Nonetheless given all the negative news encountered, rebounding off its harvest low to close at 83.15 for a loss of only 108 points is seen as positive.

The faltering macroeconomy continues to hang over this market like an anvil. Inflationary pressures show little signs of letting up. The core CPI, consumer prices excluding food and energy, experienced its biggest jump in forty years rising 6.6 percent in September. Fueling this increase was the price of services, such as healthcare, housing, education, auto repair and others.

This is of interest because inflated service prices are much harder to tame than that of goods which remained unchanged. This leaves little doubt the Fed will remain hawkish raising interest rates once again in November.

Fundamentally, the news was just as bearish. Not surprisingly , USDA in their October WASDE report, lowered world mill use by three million bales to 115.6 million. In turn, with global production reduced only slightly, world ending stocks increased 3.1 million bales to 87.9 million, the second highest level in the past five seasons. Reflective of this were last week’s export sales.

Current crop sales of 144,280 bales though up sixteen percent from the previous week were nowhere near where you would expect given such cheap prices. Shipment volume is a number to watch carefully over the next couple of months as current crop becomes more readily available for transport. Last week shipments of 168,820 bales must increase significantly to support futures price.

U.S. production left unchanged at 13.8 million bales is still questionable. Although, with record setting yields being achieved in many parts of the Southeast and Midsouth it may appear doable. The fact additional irrigated and dryland acreage in the Southwest is being abandoned daily makes it less likely.

Where to from here? Cotton prices holding steady amidst all this bearish news is akin to saying you can’t get blood out of a turnip. In other words, keenly aware of this negativity for weeks the market is already trading it. Through last Tuesday, specs had reduced their net long position to mere 2.6 million bales, the weakest it has been since August 2020. Not that specs cannot go lower but having little left to liquidate and the trade certainly not encouraged to short the market at these levels, selling pressure should subside.

Even still, with demand falling to the lows of early 2020 and further cuts expected any significant improvement in price will meet stiff resistance. With that mind, as mentioned last week, a range bound market can be expected at least through harvest.

The marketing plan of most was once higher priced contracts were filled, they would capture a strong basis on their overages and price similarly. Though the latter is not currently possible, fortunately the basis for quality cotton is the best we have seen in years.

Resist the temptation to hold cotton. Instead, take advantage of this exceptional basis, sell on call, and delay pricing until such time as cotton prices move higher to compete with other crops for planted acres.