AUGUST 21, 2020

CROP CONDITIONS AND WEATHER CONTINUE TO BE FOCAL POINT

• Export Sales Report Slightly Improved from Previous Weeks’ Lull
• Recent Hot Weather Impacts West Texas Crop
• South Texas in Predicted Tropical Storm Path as Harvest Progresses

December futures spent most of the last week jumping back and forth from 62.80 to 63.80. Prices finally rallied through the top of the past two weeks’ range, climbing to the week’s high at 64.72. December futures settled at 64.52, up 153 points from last Thursday. Average daily trading volume was low until Thursday’s rally. Open interest gained 3,336 contracts to 193,554, the second-highest level in months.

OUTSIDE MARKETS

The S&P 500 made a new record this week, exiting a bear market (a 20% decline) at the fastest pace in history. Stronger than expected second quarter performance from several large companies helped to propel the market’s optimism, despite the notes of caution investors found in the minutes of the Federal Reserve’s July meeting. Unfortunately, new jobless claims were back over one million this week, but continuing claims fell 636,000 to 14.84 million. Interest rates declined from last week’s small movement higher, and the USD Index made a fresh multi-year low. 

EXPORT SALES

U.S. export sales picked up from the past several weeks’ lull, but not by much. Net new sales of upland totaled 128,000 bales, while Pima sales were 16,700. Shipments were rather impressive with 421,500 bales of Upland reported, but it should be noted that 47,900 bales were flagged as “Late Reporting”, which signifies they were likely shipped last marketing year (i.e. before August 1). Of this week’s new sales, China was the largest buyer (56,800 bales), followed by Vietnam (24,800), Bangladesh (22,000), and Pakistan (14,800).

CROP CONDITIONS AND WEATHER

Most folks in West Texas find it a mystery that crop conditions improved on this week’s Crop Conditions and Progress Report, but they did. This week provided some temperature relief to the crop, but the stress of the recent hot spell is becoming more evident. Crop conditions in Texas and Oklahoma seem likely to deteriorate on next week’s report. Highly localized showers continue to provide relief to a lucky few. At least that pattern is supposed to continue next week.

South Texas and the southeast are having a different kind of luck. South Texas finds itself in the predicted path of another tropical storm, which is forecast to make landfall Tuesday. Cotton around Corpus Christi is reported to be more than half harvested, but picking is only just beginning in the Upper Coast. Over in the southeast, what is currently Tropical Depression Thirteen is forecast to strengthen into a hurricane that will make a glancing blow on the southern tip of Florida Monday afternoon, then curl back northward toward the panhandle.

THE WEEK AHEAD

Trade talks between the U.S. and China were cancelled and re-scheduled. China continues to purchase U.S. agricultural goods, but headlines about U.S.-China relations will continue to generate whiplash in the markets. Crop conditions and progress will also occupy traders’ attention, particularly the percent harvested in Texas before the impending storms arrive. Traders will be closely monitoring the storms themselves with any extra attention they may have available. Lastly, the Export Sales Report will remain a focal point.

IN THE WEEK AHEAD:

• Friday at 2:30 p.m. Central – Commitments of Traders
• Monday at 3:00 p.m. Central – Crop Progress Report
• Thursday at 7:30 a.m. Central – Export Sales Report
• Thursday at 2:30 p.m. Central – Cotton-On-Call