Cotton sank into the August doldrums all week but was able to show a little life in Friday’s (June 16) trading as the market prepared for the three-day weekend. The June 19 U.S. holiday means the commodity and financial markets will be closed. Thus, Friday’s rally was welcomed as insurance against Monday’s closing.
Cotton still lost about 230 points on the week as December fell to nearly 79 and 80 cents respectively before rallying a cent higher near the close. As July creeps closer to its first notice day, the high probability of a strong taker of the certificated stocks is most probable.
The stocks will likely head to China before all is said and done. The recent Chinese purchases were made principally to shore up the Chinese cotton reserve program and reminds us that textile mill demand is still slow. Consequently, the pace of yarn sales – while only very slightly improved – simply confirms to the market that world economic conditions are still very weak.
Europe is easing through what is only a mild economic recession, and most continue to feel the U.S. must face a minor recession. The July contract looks to move into its July 26 first notice day on the defense, trading between 80 and 83 cents. December cotton prices will likely battle the 79-83 cent price level into early July.
The Southeast and Mid-South received downpours all week and will get more in the coming week. While adequate at present, the Southwest irrigated and dryland cotton will need moisture in the coming 10 days. Recent rains supplied desperately needed subsoil moisture, but the past two-year-plus drought still suggests the Southwest’s immediate need for moisture is sooner rather than later.
Planted acres across the U.S. remains a bit of a mystery. While competing crop price ratios suggested cotton acreage could fall as much as 25% on the year, survey after survey showed growers were not responding to those ratios as had been the situation in past years. Yet it does appear that once Mid-South and Southeast growers began their plantings, they opted for far more soybeans in lieu of cotton – just as the price ratios suggested.
USDA’s June 30 plantings report will tell the tale.
Yet, for now, the market will have to wait on early boll weevil certifications and windshield surveys to estimate planted cotton acreage. However, most feel that Southeast and Mid-South planted acreage will be down 5-8% below USDA’s March planting intentions report. As should be expected, the market bulls are vigorously making the point of smaller plantings.
The market is pausing as it waits for the next fundamental to surface. The June 30 planting report is on the horizon. Yet, moisture requirements will increase in concern the longer the Southwest goes without moisture. We have commented on several occasions that demand will not likely change its negative course until March 2024. Thus, there will probably be some more limited price deterioration between now and then. However, one should not become “overly bearish,” as markets do right themselves. Once the consumer can get his head above water (at least six months away), hopefully cotton prices ease higher. The operative world is “ease.”
As said last week, December is still in a trading range that stretches from 75 to 88-89 cents. Mother Nature will control price direction for the coming month.
Give a gift of cotton today.
Dr. O.A. Cleveland is professor emeritus, Agricultural Economics at Mississippi State University.
Πηγή: Cotton Grower