MAY 4, 2018

MARKET MOSTLY QUIET UNTIL TODAY

Futures prices were relatively calm this week, with average trading volume at its lowest in months. July futures fell sharply to 83.32 cents per pound Monday but quickly returned to the 84.00- to 85.00-cent range. December futures activity mirrored July’s, with a low of 78.55 Monday followed by an upward drift for the rest of the week. Today’s trading surprised the market with both July and December jumping up to new life-of-contract highs. July futures reached 87.06 cents, and December touched 80.70 just before trading closed.

MOST OF HIGH PLAINS STILL DRY

Although helpful precipitation fell in the Rolling Plains, Oklahoma, and Kansas, the market was not impressed. Forecasted rain shifted eastward again, missing the Southern High Plains district. Unfortunately, over the last 30 days, only a fraction of it has received more than half-an-inch, and a sizable portion has not received any rain at all. Since the Southern High Plains accounts for more than half of West Texas cotton acreage, the continued lack of rain in this area is helping keep December prices up.

PLANTING PROGRESS

Cold and wet weather has delayed planting in the rest of the Cotton Belt. Of the 15 states monitored on the weekly Crop Progress Report, only Georgia and Texas are ahead of the average planting paces. However, dry and warm weather this week and next is expected to help producers make rapid advances in the Delta and Southeast.

MORE STRONG EXPORT DEMAND

Once again, the weekly export sales report revealed strong demand for U.S. cotton. In the week ended April 26, exporters made net new sales of 189,900 Upland bales for delivery in the 2017-18 marketing year (before August 1) and 299,100 bales for next marketing year. Shipments also continued at record pace, with 432,600 bales leaving U.S. borders. U.S. export commitments are now almost two million bales higher than USDA’s current 2017-18 export forecast (15.0 million bales), leading most market watchers to expect an upward revision when May’s updated estimates are released next Thursday at 11:00 a.m. Central Time.

TRADERS LOOK TO NEXT WASDE REPORT

In addition to updated estimates of the 2017-18 balance sheet, the May World Agricultural Supply and Demand Estimates (WASDE) report also will be the first to include USDA’s forecasts for 2018-19. Strong export sales and the drought in the Southwest almost certainly mean early predictions of demand and production will be wrong, but many traders will take the figures at face value since there are few who can do a better job than USDA. For that reason, next week’s estimate for next marketing year has the potential to move the market dramatically. All traders will be closely watching the report upon its release.

OTHER FACTORS

The May WASDE report will dominate next week’s focus, but there are other important factors, too. A large advance in plantings on Monday’s Crop Progress Report could relieve the modest worry about delays in the Southeast. West Texas precipitation forecasts also will figure centrally. Although it falls just before the WASDE release, Thursday morning’s export sales report also will reveal whether mill demand has continued with the market over 83.00 cents.

IN THE WEEK AHEAD:

• Crop Progress will be released Monday at 3:00 p.m. Central Time.
• The Export Sales Report will be released Thursday at 7:30 a.m. Central Time.
• The May WASDE Report will be released Thursday at 11:00 a.m. Central Time.
• The CFTC Cotton On-Call Report will be released Thursday at 2:30 p.m. Central Time.
• The CFTC’s Commitments-of-Traders Report will be released Friday at 2:30 p.m. Central Time.