By Jeff Thompson, Autauga Quality Cotton

Confronted by mixed signals both macroeconomic and fundamental, cotton prices fell sharply last week. Though trading nearly limit up mid-week, it wasn’t enough to stave off losses as December futures gave up three cents while March lost two and half cents. With repositioning from December to March futures all but complete,  our focus shifts to the latter.

Several key indicators measuring inflation were released last week. On a positive note, the PPI (Producer Price Index) rose at an annual rate of 8 percent in October down from 8.4 percent in September. This on the heels of a decline in the CPI, suggests inflation may have peaked. As a result, the Dollar fell to a three-month low triggering the market’s strong mid-week rally. In other unexpected news,  retail sales were up 3.1 percent year over year in October. It is further projected with holiday shopping returning to a post-pandemic normalcy, retail sales will increase six to eight percent in November and December. The silver lining could be greater demand for cotton as apparel was one of the few items declining in price last month. Nonetheless, the market perceives a  resilient consumer and strong labor market as stimuli for the Fed to further hike interest rates.

Fundamentally, the week’s biggest disappointment was the lack of export sales. Combined current and new crop sales totaled a paltry 33,140 bales,  while shipments were a respectable 183,700 bales. Down 79 percent from the previous week, it was the worst week of the marketing year. One explanation could be  futures prices were trading on an average eight cents higher than that of the previous week. If so, this tells us the level at which textile manufacturers are no longer able to pass along costs. Some consolation can be taken in that cancellations were held to just 2,200 bales.

Where to from here? Who knows what to expect this week as the delivery period for the December futures contract begins Wednesday, which often stirs some excitement. However, knowing the price level at which buyers must draw the line, look for March futures to trade in a range between 78 to 88 cents barring any unforeseen economic turn of events. At least until harvest season is complete which with over three-fourths of the U.S. crop harvested but slightly less than half of it ginned has a long way to go. The biggest influence on cotton prices will not be felt until growers begin talking about 2023 planted acres.

In closing, we would like to extend to you and yours a heartfelt  Happy Thanksgiving! We have so much to be thankful for, not the least of which is the industry in which we all are a part. Unlike any other commodity,  the cotton community is a close-knit family. Together we share in the trials as well as revel in the good times, always willing to help one another. For those we know personally, thank you for your trust and friendship. And those we know only through these printed words each week; we thank you and hope we have been and will continue to be of help in some way.