AUGUST 7, 2020

COTTON FUTURES CONTINUED TO CLIMB THROUGHOUT WEEK

• Export Sales Report Showed Low New Sales
• Crop Conditions in Southwest Region Decline
• Traders Continue to Monitor Progress on Next Round of Coronavirus Aid

Cotton prices set the low for the week at 61.92 cents per pound last Friday and continued to climb throughout the week reaching a high of 65.05 cents on Thursday. December futures finished the week at 64.85 cents, up 167 points for the week. Credit for this week’s rise was attributed to an influx of speculative positions. Daily trading volumes were never heavy with Monday being heaviest at 29,705. Open interest increased 12,693 contracts to 186,675.

EXPORT SALES

For the week ending July 30, with the end of the marketing year looming, large new sales were predictably quite low at 900 bales. Combining the low sales with 69,400 bales of cancellations led to a net reduction in sales for the 2019/20 crop of 68,500 bales. China had the lion’s share of cancellations with 65,400 bales. For the 2020/21 marketing year (starting August 1), new sales were 130,800 upland bales including 46,900 bales for China and 22,100 bales for Vietnam. In addition, 13,300 Pima bales were sold for delivery in the 2020/21 marketing year. Upland shipments for the week totaled 346,800 bales with China (116,700 bales) and Vietnam (103,300 bales) being the predominant destinations.

CROP PROGRESS AND WEATHER

Crop conditions in the Southwest region drifted lower this week. USDA’s Crop Progress and conditions report showed cotton rated “good” dropped from 30% last week to 24% this week, cotton rated “fair” increased from 43% to 48%, and the “very poor” category increased from 3% last week to 4%. The “excellent” and “poor” categories remained unchanged at 4% and 17% respectively. Hurricane Isaias made landfall near Ocean Isle Beach, North Carolina, late Monday with maximum sustained winds of 85 mph. Most reports that we hear from the southeast detail beneficial rainfall and minimal damage.

OUTSIDE MARKETS

Stocks moved higher this week as positive news trickled into the market. Tech stocks led the way with the NASDAQ setting new record highs this week. The COVID-19 caseload appeared to level off and begin decreasing in most areas of the country with some exceptions. Federal Reserve officials are considering taking a more relaxed view of inflation by allowing for periods of inflation slightly higher than 2% in order to compensate for periods of inflation below the 2% target. Investors continued to pile into the gold market as a hedge against inflation with gold closing over $2,000. The U.S. Dollar Index continued to slide lower helping to make U.S. exports more competitive on the world stage.

THE WEEK AHEAD

Traders will continue watching to see if Washington can finally agree on the next round of coronavirus aid, but the main focus of cotton traders will probably be Wednesday’s World Agriculture Supply and Demand Estimates Report.

IN THE WEEK AHEAD

• Friday at 2:30 p.m. Central – Commitments of Traders
• Monday at 3:00 p.m. Central – Crop Progress Report
• Wednesday at 11:00 a.m. Central – WASDE Report
• Thursday at 7:30 a.m. Central – Export Sales Report
• Thursday at 2:30 p.m. Central – Cotton-On-Call