December futures ran to 90 cents on the week, failed, and tried another run but was unable to post a close at the 90-cent level. The 89-90 cent resistance proved too strong.
Yet, cotton has the advantage over oilseeds and grains. Its home runs are grand slammers compared to the doubles and singles in the grains complex. Like the great spouse, cotton promises less and gives more year in and year out.
Seed varieties continue to improve both in terms of yield and quality. The old SLM 1-1/16-inch measurement has given way to the M 1-3/32 inch and SM 1-1/8 inch. Today’s varieties are delivering for the grower. Premiums for 11’s, 21’s, and 31’s are reflected in every recap sheet. These varieties “sell themselves” – that is, buyers come to the grower looking for quality. Mills demand quality, and the market pays the premium.
Never give up on cotton. Yes, it requires more management than oilseed and grain crops. It carries more risk. Thus, cotton growers get big rewards for accepting the management role. Never give up on cotton. More runs are coming.
The old crop December contract is passing the price leadership baton to the March contract. First Notice Day is Nov. 23, thus leaving only two more days before its expiry period begins. March has excellent support at 82.50 and good support at the weekly close of 83.40-84.00 cents. The current price objective for the March contract is 87-90 cents. The attempt at higher prices came with good volume this week, but traders were more interested in getting to the delivery period and backed out of the market at week’s end. There are scant certificated stocks, so the delivery period will be void of fireworks.
No matter how we slice it, no matter how much we hope, no matter the number of times we blink, the U.S. economy is in the proverbial tube. Ditto the world economy. For every two steps forward, it takes a giant step back. There is a good bit more spade work coming before U.S. monetary police can stimulate this giant consumer engine once again. The Fed made it clear (in the absence of an actual vote) that it will continue to increase interest rates and that they do not, yet, have a date as to when they will stop. There are positive sightings of encouraging economic news, but it is just rose-colored lenses that we are looking through.
Demand remains the problem, and there is just no quick end to the problem. The steep discounting sales continue, and mills continue to complain that yarn inventories are difficult to work down. Again, yarn mills have scheduled work layoffs through the end of the first quarter 2023. Mills will likely continue at less than 100% capacity well into the second quarter.
The U.S. export sales report gives a clear picture of demand. Weekly net sales for the week ending Nov.10, totaled only 25,100 bales of upland cotton. There were only ten countries in the market, and the biggest buyer, Turkey, purchased only 7,000 bales. Most purchased less than 1,000 bales. Call that unheard of, never.
Shipments were just seasonally okay. Net export sales are about 700,000 below last year’s pace while shipments are about 700,000 bales ahead of last year’s pace. Remember however, 2021-22 exports were only 14.62 million bales – far from a banner year. Less than three million bales have been exported year to date (Aug. 1 to Nov. 10).
The March contract will spend time between 84-91 cents, or within a range of 82-94 cents. However, I do suggest that 90 cents is a bit pricy, just wish it were not so. The new crop December contract is making a valiant attempt to dig in its heels at the 78-cent level. The new crop December should work the 300 points on either side of 78-80 cents with the path of least resistance higher.
Give a gift of cotton today.
Dr. O.A. Cleveland is professor emeritus, Agricultural Economics at Mississippi State University.
Πηγή: Cotton Grower
