June 25, 2021

• Wednesday and Thursday Tie for Highest Price This Week
• Federal Reserve Chairman Put Market at Ease
• Slower Export Shipments
• All but 4% of Cotton Acres Planted

Like many other markets, cotton futures were able to gain back most of last week’s losses. December futures gained every day but Thursday, which posted a minor loss. Last Friday’s open was the lowest price of the week, while Wednesday and Thursday tied for the highest price at 87.00 cents per pound. Volumes were much lower than last week with its high volume of trading spurred by outside markets. Open interest fell 5,498 contracts from Thursday of last week to 208,157, but seems to have stabilized.

Outside Markets

The sharp adjustment to last week’s Federal Reserve announcement seemed to be over this week. “Dovish” (i.e., favoring accommodative monetary policy) comments from Federal Reserve Chairman Jerome Powell put the market at ease, especially as he remarked that he still expects inflation to be transitory (albeit at a higher level than originally expected) and for many prices to come back down as the effects of re-opening businesses work through supply chains and production ramps back up. Powell’s calming tone pushed stocks to recoup most of last week’s decline, and removed the tailwinds from the U.S. dollar and interest rates, which helped to support commodities.

Export Sales

Net Upland Cotton export sales consisted of 74,700 bales of cotton for what’s left of the 2020/2021 marketing year, which ends July 31, and 148,900 bales of new orders for the 2021/2022 season. Shippers also sold 9,100 bales of Pima. Shipments were a bit of a disappointment to the market as only 221,000 bales were reported, which was about a third less than the recent average. The slower shipments partially reflect the record quantity of shipments that have already been made and continuing logistical constraints. In any case, the slower shipments cause some to question whether the USDA’s June export forecast increase to 16.4 million statistical bales may have been a bit premature.

Crop Progress and Weather

Monday’s Crop Progress and Condition Report showed that, as of last Sunday, all but 4% of cotton acres had been planted. Squaring is now the lead progress variable. Across the Cotton Belt, 21% of the area is squaring which is four percentage points behind average. Most of the lag is driven by the southern half of the Mid-South, with Arkansas at 12% vs a five-year average of 60% and Mississippi at 9% versus an average pace of 24%. Crop condition continued to improve, but favorable weather is desperately needed in all regions. For the Mid-South and Atlantic states that means a little more sunshine and less heavy rainfall. Thankfully, chances of rain have rapidly and somewhat surprisingly increased over most of West Texas and Oklahoma, which will be a timely and welcome change from the past two weeks heat, dryness and high winds. The heaviest rains are expected on Sunday.

The Week Ahead

Next week’s key data point is the USDA’s Acreage Report, which provides a much-needed update to planted acreage estimates of all crops. These acreage updates will have a direct impact on the USDA’s new crop forecasts, which means traders will be watching very closely for any big shifts from March’s Prospective Planting Report.

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
• Wednesday at 11:00 a.m. Central – Acreage
• Thursday at 7:30 a.m. Central – Export Sales Report
• Thursday at 2:30 p.m. Central – Cotton-On-Call