New crop cotton closed with a 97 point gain within the confines of dominantly bearish fundamentals while crop conditions were downgraded by 1% during a time of favorable weather.
OUTSIDE MARKETS: From Wall Street to LaSalle Street, losses seen at the end of last week were retraced and markets moved higher. The U.S. stock market came back from what was believed to have been an overdone sell-off and row crops bounced higher on short-covering rallies aided by crop condition uncertainties. Totaling 212,000 tons, soybeans stole the spotlight in the USDA newsroom as China and Taiwan displayed a need for our 14/15 crop.
General Comments: The aforementioned increase in speculative shorts seen on the recent Commitment of Traders report meant that these non-commercialΆs have now expanded their bearish stance to a level not seen since the Spring of 2009 when cotton was trading near 45 cents. Although the market was due for a bounce after losing more than 10 cents in July, FridayΆs release from the International Cotton Advisory Committee was anything but supportive; ICAC raised World production by 220,000 tons to 25.53 million tons and raised ending stocks by 190,000 tons to 21.69 million tons.
Higher prices paired with a predominantly bearish outlook leads to the conclusion that we are continuing to see a short-covering rally. Selling nearly one million bales of cotton into the export market over the past three weeks is slightly bullish and reveals a sense of increased demand when prices fall this low, however, rumors continue that weΆll see another increase to the crop size domestically on August 12th.
Important to take into consideration is that producers have the option to not sell here and may choose to hold out for higher prices before they heed to the recent healthy demand. After all, they have nearly four months before first notice day and the first delivery day. Export sales will continue to be watched closely but August 12th holds the key to determining whether we can formally shake the recent downtrend.
Harvest is continuing at an enthusiastic pace with 68% of the crop setting bolls versus the 5-year average of 66% at this time of the year. Conditions have been slightly downgraded and are now rated 53% good to excellent versus last weekΆs 54%.
