April 8, 2022

• Unemployment Claims Lowest Since 1968
• April Revisions to WASDE Released
• Vietnam, Turkey and Columbia Week’s Biggest Buyers
• 6% of Texas Cotton Acres Planted

Cotton finished in the red late last week but rallied to begin the week with the lead contract gaining significant ground Monday and Tuesday before reversing course mid-week. May futures settled at the lower end of its trading range at 133.20 cents per pound, down 249 points for the week ending April 7. After this close, May futures will have closed lower in the past six of eight trading sessions. Trading volumes were once again relatively heavy throughout the week. The total number of open contracts increased when compared to last week by 2,881 to 231,581 contracts.

Outside Markets

Financial markets started off the week with small gains but saw steep drops when the minutes of the Federal Reserve’s meeting last month were released. It appears that Fed officials will be taking a more aggressive approach in raising interest rates to fight high inflation. It is expected that they will raise interest rates by half a point in May and June, instead of the quarter of a point we saw in March. Fears of more sanctions on Russia also added to the bearish tone of high inflation. Fewer Americans applied for unemployment last week, keeping jobless claims low at 166,000, which was well below expectations. This historic low was seen two weeks ago, but otherwise unemployment benefit claims have not been this low since 1968.

April WASDE

April revisions to the World Agricultural Supply and Demand Estimates (WASDE) were released today. The report once again left the U.S. side of the balance sheet unchanged, which seems unusual for this time of the year, with consumption at 2.55 million bales, exports at 14.75 million bales, and ending stocks at 3.5 million bales. Shipments have started to increase, which could explain why exports were not changed this report. Global figures, however, did have a few minor changes. The conflict between Russia and Ukraine could be showing impacts on slowing demand of world cotton, which was seen in overall consumption declining by 470,000 bales of 124.07 million bales. World ending stocks showed an 810,000 bale increase to 83.38 million bales.

Export Sales

The Export Sales Report for the week ending March 31 saw marketing year lows and highs between sales and shipments. The demand for cotton slowed and sales were down with only 62,900 Upland bales getting booked, which is a marketing year low. A lower number of sales was expected given the continued volatility of the market and mill’s resistance to buy at the current price level. China was noticeably absent from the list of biggest buyers this week with the few sales being to Vietnam (42,100 Upland bales), Turkey (23,700), Colombia (5,600), Japan (5,200), and India (2,800). China, did however, have a 23,900-bale reduction, which played a part in the low net sales number. Upland sales for 2022/2023 were at 64,400 bales, which is right around average for this time of the year. Shipments, however, saw a marketing-year high with 455,500 Upland bales getting shipped, which is well above the weekly average needed to meet USDA’s export estimate.

Weather and Crop Progress

There has been little moisture this week, meaning not much has changed regarding drought levels and soil moisture throughout much of the Cotton Belt. States in the eastern part of the Cotton Belt have seen intermittent severe storms and cooler weather, which could pose an issue with growing season approaching. As South Texas planting moves forward, 6% of Texas cotton acres are now reported planted which is behind the average of 9% for this time. It is predicted that South Texas is going to have near normal precipitation levels, which hasn’t been seen yet, but will be much needed as the growing season progresses.

The Week Ahead

Weekly export sales will keep its usual significance to see if the COVID lockdowns in China will have any impact on the higher shipment numbers we’ve seen recently. With a shortened week next week due to the market being closed for Good Friday and a fresh WASDE in hand, we will see what traders continue to do with the usual weekly focal points.

In the Week Ahead

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