MAY 31, 2019
FUTURES FALTER AT WEEK’S END
- July Closes at 68.08, December Closes at 67.07
- Planting Accelerates as Insurance Planting Dates Loom
- Weather Making Planting Difficult in Some Areas
- Demand Continues
- Trade Tensions Applying Yet Another Large Dose of Uncertainty
Futures on Tuesday popped higher after the Memorial Day Weekend with July closing up 108 points at 69.47 cents per pound, and the December contract closing at 68.47 cents, up 92 points. Wednesday and Thursday the market went back and forth without much movement. Friday, the cotton market fell hard as did the other row crops with July closing down 126 points at 68.08 cents and December down 125 points at 67.07. Going forward, the July contract has only 15 trading days left before First Notice Day on June 24. Total open interestrose 824 contracts to 216,666, and daily average volume was lower than in recent weeks.
CROP CONDITIONS AND PLANTING PROGRESS
The Rio Grande Valley in Texas is in good shape overall, with the dryland areas needing more rain. Corpus Christi through the Upper Coastal Bend looks to be in really good shape for the majority of the crop. The Central Texas area will have some acres that will not be planted to cotton due to the extraordinary amount of rain received over that last few months.
The Rolling Plains also has been soaked with heavy rainfall over the last month. The final planting date for much of the Rolling Plains area is June 20 so there is time for some areas to dry out. With irrigated acres between 5 to 15 percent in the Rolling Plains, excessive moisture right now could be a good thing down the road.
South of Lubbock is thought to be in good shape overall. Lubbock County is estimated to be 85 percent planted. Some areas west of Lubbock are still needing rains as many of the showers developed after crossing the state line. The story is quite different looking to the east of Lubbock as some producers are still waiting for the soil to dry out before planting. North of Lubbock where the final planting date is today, farmers may have a very difficult time planting in some rain-soaked spots. Some are speculating that 200,000 to 300,000 acres will be lost or not planted to cotton in the upper Panhandle.
Oklahoma has seen very heavy rains with many areas receiving 7 to 12 inches over the last 30 days. They have a few more days for the wetter fields to dry out as some of their planting dates stretch until June 20.
With the final planting date for Kansas being June 1, there will be some acres that simply will not have the time to get planted if the fields are inundated with water. With so much newly expanded cotton acreage in the last couple of years, it is difficult at this time to say how much less than expected will be planted.
WHETHER OR NOT WE LIKE THE CURRENT PRICE LEVELS, IT IS HELPING SELL U.S. COTTON
Export sales for the week ended May 23 were again seen as being very healthy. A combined 425,000 bales of net sales for current marketing year and new crop were reported for Upland cotton. Shipments were excellent at 410,600 bales of Upland and 32,100 bales of Pima cotton. The main reason for the good sales and continued inquiries from around the world is that price levels are obviously attractive for mill buyers. This is seen from the number of participants in the market at this time. The Indian Minimum Support Price (MSP), which makes their domestic cotton more expensive at the current market level, brings the Indian mill buyers into the market for foreign stocks.
TARIFFS PLACED ON IMPORTS FROM MEXICO
Reports indicated that the United States will impose a 5 percent tariff on all imports from Mexico beginning June 10. This round of tariffs had many investors running for the door today. Cotton and other agricultural commodities were down, and the Dow-Jones Industrials were down 354 points. You probably have heard in the past “Investors Hate Uncertainty”, and that’s exactly what the picture looks like today.
IN THE WEEK AHEAD:
- 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
- Friday at 2:30 p.m. Central – Commitment of Traders
