- Markets Briefly Rally During Holiday-Shortened Week
- Labor Market Continues Strong Recovery
- Upland Cotton Export Sales Healthy
- Cotton Planting Catches Up Across the Belt
Although it was a holiday shortened week, cotton futures made a brief departure from recent doldrums when the market reopened on Tuesday. July futures jumped back up to 84.85 cents per pound before getting back into their recent low volatility pattern. December futures traded in similar fashion, rallying back to 85.44 cents. Despite the narrow ranges of trading outside of Tuesday’s breakout, trading volumes were healthy. Open interest grew 7,334 contracts to 230,386 since last Thursday. July futures settled at 84.21, up 160 points for the week. December futures were up 158 points from last Thursday’s close at 85.04.
Outside Markets
Stock markets were mixed during the holiday shortened week. A flurry of economic data, both government data and private estimates of job market activity were released Thursday and Friday, generally revealing continued strong recovery in the labor market. This week’s initial jobless claims were the lowest since the pandemic began, and the ADP Jobs Report estimated that U.S. Non-Farm payrolls increased 978,000 in the month of May. Unfortunately, the market interpreted the strong jobs data as increased likelihood that the Federal Reserve will have to accelerate rate increases, which resulted in a sharp rally in the U.S. Dollar and a decline in stocks and commodity prices during Thursday’s trading. The U.S. labor market improved in May adding 559,000 jobs as the unemployment rate dropped to 5.8% from last month’s 6.1%
Export Sales
Net export sales last week of 180,800 bales of Upland were up 82 percent from the previous four-week average. For the week ending May 27, U.S. shippers booked another 220,500 bales of Upland for the 2020/2021 marketing year which were offset by 39,800 bales of cancellations mostly from China (23,100 bales) and Vietnam (16,200 bales). Upland sales for delivery in the 2021/22 marketing year were a healthy 98,800 bales. Pima net sales were 7,300 bales for the current marketing year. Shipments were a healthy 366,500 bales of upland bales 13,600 pima.
Crop Progress and Weather
Somehow cotton planting has managed to catch up in just about every state. The Cotton Belt as a whole has now planted 64% of expected acreage, according to this week’s Crop Progress Report, which is just one percentage point behind the five-year average. This week’s report began reporting squaring, which is also right on normal pace so far at 6% of the crop, but it was the beginning of crop condition reporting that caught the attention of many traders. Perhaps unsurprisingly for the folks on the ground here in Texas, 30% of Texas cotton was rated “Poor” or “Very Poor”. The number likely reflects the fact that most of South and Central Texas have been under relatively heavy rainfall for a month, letting little heat or sunshine help development on the early crop. The story has not been terribly different in the Northern High Plains, which has passed the insurance final planting date with many fields still flooded and inaccessible. While we would rather have rain than drought, it is hard to say at this time how much planting has been prevented or lost by the inconvenient timing. Overall, the improved moisture here has lifted hopes for a good crop when the sun and heat return to even things out.
The Week Ahead
Next week’s big focus will be the June WASDE report, which will be released shortly after next week’s Export Sales Report at 11 a.m. Central Time on Thursday the 10. Aside from these fundamental reports, July options will expire the next Friday, which is also the end of the major rolling period for large Index funds. Traders will have plenty on their plates.
IN THE WEEK AHEAD:
- Friday at 2:30 p.m. Central – Commitments of Traders
- Monday at 3:00 p.m. Central – Crop Progress and Condition
- Thursday at 7:30 a.m. Central – Export Sales Report
- Thursday at 2:30 p.m. Central – Cotton-On-Call
