The cotton market showed gains across the board all week before easing back slightly at week’s end. Yet, prices did show gains, and technical patterns also improved. Market bulls were able to gain the offensive, and bears were forced to the defensive side. Prices climbed to levels not seen in well over a month, and settlement prices kept the bulls’ position on the top.
The weekly export sales report was not stellar compared to recent weeks but was multiple times greater than the level needed to reach USDA’s export estimate for 2020-21. Mills continued to do some price fixing, but future requirements continue to offer market support. July on-call sales are particular favorable for higher prices. Consumer demand and textile demand continue to bode well for cotton consumption. There are COVID-related mill slowdowns in Asia and the Indian subcontinent, but those are very limited compared to initial announcements. It seems that demand for cotton textile operations is just too strong to slow activity too much. As stated last week, the market will continue to back and fill in its march to higher prices.
Projections of new crop December contract are some 4 to 5 cents higher than the 82.67 cent high established on April 16. The current price track is up to 87-88 cents. However, reaching that price level – and if still facing Mother Nature’s drought pandemic – would not preclude a rise into the 90s as the U.S. stocks level would begin a dramatic fall of one million or more bales.
Mother Nature did provide limited moisture to West Texas during the week, but coverage was very sparse, rainfall amounts were very limited, and it was even difficult to claim any private showers. The market did not reflect that any moisture fell over the region. The drought disaster clock continues to tick, and the Memorial Day heroics for West Texas still command the attention of both the market bulls and bears. Nevertheless, Texas is already assured of a subpar crop, at best, due to the absolute lack of subsoil moisture.
On the export front, the weekly sales report noted net sales of only 122,300 bales of upland for the current season, 3,100 bales of Pima, and another 22,800 bales of upland for the 2021-22 marketing season. While some expressed dismay over a so-called low sales number, sales need only increase by another 600,000 bales in total to climb to the level reasonably expected to reach the USDA export estimate – and there are still 15 weeks left in the marketing year. Weekly sales need to average only some 40,000 bales a week to reach the USDA export estimate of 15.75 million bales.
Thus, shipments may be adjusted higher to 15.8-15.9 million bales. China has purchased more than 5 million bales from the U.S. this season, and more than 4 million have been shipped. There is ample time to ship the remaining purchases. Nevertheless, it would be typical for the delivery of some sales be moved into the next marketing season for actual delivery. Therefore, even if there were not any new sales – and there will be – the pace of shipments to China is well within the desired goal.
As noted last week, world trade in cotton is expanding month by month. The climb to higher prices is well defined. Expect prices to begin marching into the upper 80s and possibly more from there.
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Πηγή: Cotton Grower