Cotton’s price run continued all week, with the old crop July futures contract closing at 53.15 and the new crop December futures contract at 55.60. Fundamental news was scarce on the week, but it was constructive in that the market held the gains that resulted after the so-called very bearish USDA April supply demand report.
This response continues to add fuel to the contention that the April report only confirmed what the market had already declared. The uncertainty surrounding 2020 plantings – specifically in the U.S. and coupled with the greater uncertainty about world cotton consumption – has yet to give good price direction, much less any detail about price highs and lows. However, short term technical indicators did prove to be positive, as the 10-day moving average passed over the 20-day price curve.
Additionally, since the recent double bottom in Chinese cotton futures, New York futures have performed much better. The new crop December contact has all but reached 56 cents and is offering growers about a 64-65 price for lint produced in 2020. Thus, despite the dreadfully low ICE futures prices, net prices to growers for the 2020 crop from all sources are now within the grasp of 70 cents. Included in this calculation are the lint price with CCC loan differentials, the LDP and the seed cotton payment. Any gin or warehouse rebate would be a plus.
Old crop recap sales were active, with a major Memphis merchant capturing most of the business. Thus, the market is set to see the same merchant as a very strong taker of the certificated stocks delivered on the May futures contract (May futures first notice day is April 24, thus leaving four more trading days before the delivery period begins). Activity suggests the merchant in question has a good volume of solid guaranteed contracts for export delivery well into the future.
While U.S. export expectations were lowered 1.5 million bales in the USDA WASDE release, shipments continue very strong. Granted, new sales have become weak, and sales cancellations dwarfed new sales this past week. Net sales of U.S. cotton for the week ending April 9 were a negative of 183,900 bales of upland and with no Pima sales. However, marketing year exports to date are 9.4 million bales – more than 21% percent higher than the same time a year ago.
Additionally, shipments continue at the best pace since the 2010-11 marketing year. In the last three weeks, China has cancelled cotton sales of just over 284,000 bales. U.S. export sales to date for the 2019-20 marketing season now total 15.1 million bales.
Some contract months have experienced higher highs and higher lows – the necessary ingredients for an upward trending market. December continues to see higher lows but has not been able to establish higher lows on a daily basis. Thus, the market is still looking for more ammunition to move higher. Likely, the ammunition will not come until we get another month into the planting season.
Give a gift of cotton today.
Dr. O.A. Cleveland is professor emeritus, Agricultural Economics at Mississippi State University.
Πηγή: Cotton Grower