Cotton futures were lower on Thursday, giving back the majority of the gains from Wednesday. December 2013 lost 82 points, closing at 84.72 cents. March 2014 lost 68 points to close at 84.46 cents. December 2014 lost 62 points to close at 79.31 cents.
There are no changes today in the advice. Here are some views about factors that influenced todayΆs trading.
Cotton prices were lower on the close. During the session, the December contract did trade to a new high for the rally of the past two weeks, but early gains were not sustained. Those early gains were of course related to news on Wednesday. Then, the Federal Reserve announced that it would continue its $85 billion per month bond buying program. The accommodative monetary policy was a surprise in light of the fact that many economists had expected that the Fed would begin slowing the buying pace. That is the so-called “tapering”. Some traders saw the news as inflationary and it resulted in some early session buying interest in commodities, including cotton. The dollar plunged.
Prices turned negative in later trading. Some of the bullish enthusiasm from Wednesday began to run thin. Export sales that some saw as disappointing may have been a factor. In the weekly export sales report, upland cotton export sales totaled 103,100 bales and shipments totaled 112,900 bales. Total upland cotton export commitments are at 40% of the USDA forecast for the crop year. The five-year average is at 45%.
China sparked renewed buying interest on Wednesday, but that was subsiding on Thursday. It may have only been symbolic, but on Wednesday ChinaΆs state reserves bought its first 2013-crop domestic cotton. The total was only 780 tonnes. However, if China continues to buy and grow its domestic stocks for a third straight year, it shifts the perspective of the world cotton market to being much more bullish than if China stops the buying, or shows signs of actually releasing stocks into the market place.
A few weeks back in August, the assumption was that China was planning to give subsidies to farmers over more stockpiling into the reserves. To address the resulting market confusion, the U.S. is asking China via an upcoming WTO Ag Committee meeting for information on stock levels, supports, and plans to manage the existing stocks.
Doane economists issue brief announcements of market impacting news most days on Twitter at DoaneAg. It is a place to catch quick updates on market moving news, such as the crop progress reports or weather forecast changes, and then followed later with these more extensive commodity write-ups.