The USDA and CFTC weekly and daily reports are absent with the government closure. That has not slowed cotton trading, and some equity markets continue their record pace.
The market is finally dealing a few good cards to the cotton grower — very few, but at least some. The front end of the New York ICE market (December and March futures) established new life as expected prices fell to the 63-cent level where the recently expired October contract went into its expiration period. This was the long-term price objective that the December had faced since November 2024. December and March can now search for higher ground.
The search will be slow and tedious. In fact, December could momentarily slip to the 62.50 level before it goes off the board. Too, the road to higher prices is paved with very weak demand. Cotton futures have reached the bottom of a classic long-term trading channel and should begin to improve by the new year.
Suggesting a market top or bottom is risky, but cotton trading has exhibited activity one would expect from a market actively searching for a market bottom. The market spent several weeks trading within a very narrow trading range and following the channel lower. Initially, the range was 300-350 points. Then began a period of trading in a 150-point range. Finally, over the past two weeks, the daily trading range was well below 100 points. Friday (Oct. 10) activity saw the trading range to near 160 points, from the low 63s to the high 64s.
This trading activity occurred at excellent volume, an indication that traders were chasing the market both higher and lower. Again, this is typical activity when market are establishing a bottom (or a top). Further, speculators had become very aggressive sellers, and open interest had skyrocketed to almost the highest of the year, an indication that “everyone and their brother-in-law” was trying to get in the market — another classic signal indicating a market is near bottom.
As suggested, the market is only poised to correct its fall. It is not yet on enough solid footing to allow for a price increase. The December contract can retrace, possibly back as high as 66 cents, but likely the 65-cent mark will stop any price rally. The March futures contact can possibly see the high 60s. However, the cotton industry’s lack of promotion directly to the consumer has proven to be extremely costly to the cotton grower.
Consumers are flush with purchasing power, yet they have shown a clear and decided acceptance for synthetic fibers. Cotton is losing not only the battle, but the war. The U.S. cotton industry abdicated the throne as the consumer’s choice for apparel and has not reconnected. Cotton simply walked away from the consumer and has not reconnected.
The cotton promotion organization indicated that “use of cotton was a smart business decision, more important than consumer preferences.” Cotton is fighting for its life and needs to give consumers “an offer they can’t refuse.” Consumer preference is the only variable that matters. Nothing else.
At least the price freefall is over.
Give a gift of cotton today.
Dr. O.A. Cleveland is professor emeritus, Agricultural Economics at Mississippi State University.
Πηγή: cottongrower.com