The cotton market pulled up its bootstraps in the week’s trading (Nov. 4-8) as December spent time above 71 cents before settling the week at 70.96 cents. The proverbial worm is turning. It’s a fat worm so the roll over will require time, but it is coming.
USDA’s November supply demand report was marginally bullish as world ending stocks were reduced. However, the report did highlight the yearlong weakness in demand as U.S. carryover stocks were increased and estimated world consumption continued its monthly stairstep downward. The 70-71cent price support level fell as December futures prices spent a day in the 69-cent area. However, the market was quick to move back above 71 cents.
Look for the 69-73 cent range to dominate trading, with a trade up to 73 cents that likely will not be seen until after expiration of the December contract.
While leaving the size of the U.S. crop essentially unchanged at 14.2 million bales, USDA increased its estimate of the Georgia crop by 200,000 bales but decreased its estimate of the Texas by the same amount. Based on its expectation of declining world consumption, U.S. exports were reduced 200,000 bales, down to 11.3 million bales. Thus, carryover of U.S. stocks was increased 200,000 bales to 4.3 million.
USDA did not change its estimate of the average farm price, leaving it at 66 cents per pound.
USDA reduced world production, consumption, exports, and carryover. World production was reduced 460,000 bales, down to 116.2 million bales. The Pakistani crop was reduced 200,000 bales, and the Turkish crop was reduced 400,000 bales. World consumption was also reduced 515,000 bales, down to 115.2 million bales. World trade was reduced 300,000 bales, down to 42.2 million bales. World carryover was decreased 580,000 bales, down to75.8 million bales.
The continuing decline in world carryover is positive for higher prices, although the market will be slow to react. It is likely that the impact will probably not be seen in the market until late in the 2024-25 marketing season.
The market will be buoyed by increasingly stronger weekly export sales. While export sales are slow, the market’s price slide to the 69-71 cent level uncovered improved demand. This should be viewed as supportive of locking in a price low in the market.
The May and July contracts have a chance of climbing to 75 cents. However, we continue to suggest the market will not cover storage and other carrying costs.
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Dr. O.A. Cleveland is professor emeritus, Agricultural Economics at Mississippi State University.
Πηγή: cottongrower.com