The Bear will continue to dominate our cotton market. As much as we want to look ahead and find a bull rummaging through the market, bearish fundamentals continue to dominate. Simply stated, a bull market cannot exist in the absence of demand. Thus, cotton’s battle for market share will continue to dominate pricing throughout 2025.
Positive indicators even come with a grain of salt.
As expected, the nearby March contract fell back to its long-term support at the 66-67 cent level (66.26). Once again, at least four times now, that price support level has held. As earlier suggested, the potential for a more bearish activity based on speculative selling keeps alive the possibility of prices slipping as low as 63 cents. Granted, the 66-67 cent price support has proven impossible to penetrate. However, that barrier can take just so many hits until it weakens and fails.
Mills have little incentive to buy cotton on-call as they can fix the price of their few remaining on-call contracts with the expectation of satisfying week-to-week needs in a cash market that is in over supply. The availability of physical cotton is far more than the current needs. Thus, the less risky alternative for mills is buying hand-to-mouth without feeling any pressure that prices will increase.
Export sales and shipments is where the market hopes to find bullish news, but there is little fundamental news on that front that is pleasing to the bull. Likewise, the seasonal imbalance between on-call sales and on-call purchases fails to offer any support for higher prices – though it does in most years.
Saying it again may not help, but the New York ICE contract is struggling to comprehend the changing trade structure of the world cotton market. However, both shipments and sales of upland did register positive news for the market this week. Net sales of upland totaled 316,200 bales, in a week when futures prices were in the 69-cents area.
The better news of the week came in the form of export shipments, as upland shipments totaled 224,800 bales – a marketing year high. The bull would argue, you must start somewhere. Could this be the beginning of improved shipments? Time will tell, and I do hope to be wrong. But cotton destined for export had been positioned with the potential of a dockworker strike on the West Coast – which never materialized and inflated the shipment level. Unfortunately, even with year-to-date weekly high shipments for the year, shipments still lagged the level needed to reach the USDA annual estimate of 11.0 million bales. Too, the New York ICE prices reacted to the report with a triple digit move to the downside.
Cotton is beginning to lose planted area, as we view 2025 plantings. Growers were accepting that December futures could slip to 67-68 cents. However, with December fighting daily to hold 69 cents, some growers are now open to switching to other crops. Yet, rotation patterns and memories of 2024 yields will hold cotton plantings for many growers. Decision time will still last another six weeks, but the potential for higher prices over the coming weeks is a bit anemic.
Give a gift of cotton today.
Dr. O.A. Cleveland is professor emeritus, Agricultural Economics at Mississippi State University.
Πηγή: cottongrower.com