The cotton market continues to do little more than tread water, despite excellent export sales and shipments, as the market keeps an eye focused on the fallout associated with world concerns surrounding the coronavirus.
The low end of the price support level – 67.00-67.50 cents – has provided stiff resistance on attempts to push prices lower. One would think the performance of the export market over the past three weeks would have sent the market into the mid-70s, but not so, as mills continue to express concerns of maintaining spinning rates and the ability to sell yarn.
The long-term technical support continues to provide solid support, and prices should hold the 67.50 level. However, any close below 67 cents would weaken the bull considerably. Short term, the market is attempting to use the current 67.00-67.50 as its base. Yet, given that more than one million bales of U.S. cotton have been sold in the export market in the past three weeks, export sales have signaled that mills will support the market at its current level.
While the U.S. financial markets – and the equity market specifically – continue to hover near a record high, commodities as a group are struggling to formulate how to deliver goods to the Chinese market given the various work and manufacturing quarantines. Textile mill closures appear to be very limited, and mill buyers suggest they are interested in cotton purchases.
Yet, the weekly export report was void of sales to China (a net of negative 2,300 bales). Yet, in spite of this week’s negative sales (caused by cancellations of prior sales), Chinese mills are very active in asking for price quotes on a daily basis. The implication is that China will purchase at least another 500,000 bales of U.S cotton if/when some resolution to the coronavirus is achieved.
U.S. weekly export sales were an impressive 343,600 bales: 332,300 bales of upland, 4,800 bales of 20-21 marketing year sales, and 5,500 bales of Pima. As noted, China was not in the mix. Major buyers were Turkey, Vietnam, Pakistan, Indonesia and Bangladesh. Turkey made a big splash as it purchased more than 150,000 bales.
It is noteworthy that the two major historical buyers of U.S. cotton – Turkey and Vietnam – were significant buyers. Too, as Indonesia and Bangladesh grow their textile industry, the U.S. has been the primary supplier. The latter two countries have been building their textile purchases from the U.S.
Yet, the impressive feature of the weekly export sales report was the level of shipments. Shipments reached a marketing year high of 418,000 upland shipments and 5,700 Pima bales. Vietnam, China, Pakistan and Turkey were the primary destinations. Some five countries received more than 30,000 bales.
The principal concern is always demand. Demand was showing signs of increasing before the coronavirus outbreak. After two weeks of upheaval, both sales and shipments have shown significant improvement. The virus fallout drove prices lower, and mills responded with a near Christmas shopping list of cotton.
Certainly, a very healthy level of demand has been uncovered by the lower prices. Additionally, mills have continued to be very active buyers on a daily basis, including interest from Chinese mills.
Thus, last week’s comment of a price activity holds. A return to at least the low 70s is expected—72 to 75 cents, basis old crop and new crop.
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Dr. O.A. Cleveland is professor emeritus, Agricultural Economics at Mississippi State University.
Πηγή: Cotton Grower