The information contained herein is provided by Plains Cotton Cooperative Association (PCCA), a farmer-owned cotton marketing cooperative headquartered in Lubbock, Texas. It is for general informational purposes only and is obtained from sources believed to be reliable; however its accuracy and completeness is not guaranteed by PCCA, and PCCA offers no representations or warranties of any kind in providing this information. Nothing contained herein is intended, or should be construed, as advice or guidance for the marketing of cotton.

September 21, 2017

Cotton Futures Prices Lack Direction

 

Prices moved sideways for most of the week in the cotton futures market. December futures touched a high of 69.95 cents per pound on Monday and fell to a low of 68.18 on Thursday. Trading volumes were modest, averaging less than 20,000 contracts per day. The number of open futures contracts also declined slightly each day this week but remain well above summer levels, implying that many recently entered positions remain on market participants’ books.

Weather Concerns Boost Cotton Market Monday

The old saying that “bad things come in threes” held true this week. Hurricane Maria became the season’s third major Hurricane to make landfall, devastating Puerto Rico. Traders are still keyed into severe weather risk following losses from Harvey and Irma, and no one can blame the market for reflecting the possibility of further crop loss. Concern that Hurricane Maria could hit the eastern states’ crop helped the market rally on Monday. Fortunately, Maria’s forecast tracks have trended eastward taking the eastern cotton crop out of direct threat.

U.S. Crop Continues to Mature

Aside from several spots of hail in West Texas, crop weather has been mostly beneficial this week. Some of the southwestern dryland cotton is in need of water, too, but there is rain in the forecast. We hope it will not be too little, too late. Across the Cotton Belt, crops are rapidly maturing and harvest is quickly approaching. Defoliation is expected to intensify in a few weeks, and most of the country’s crop looks good. According to this week’s Crop Progress and Condition report, 44 percent of the bolls are open, which is 7 percent behind the five-year average pace, and 61 percent of the cotton is rated in good or excellent condition, which is much higher than average. The notable exception is Georgia, where 23 percent of the crop slipped down into the very poor and poor categories in this week’s report, which is the first to capture damage from Hurricane Irma.

More Weather Concerns

While it is diminishing for the Delta and Eastern crops, weather risk is still present in the Southwest. The National Weather Service expects 2 to 6 inches total precipitation over much of West Texas in the next seven days, and temperatures are forecast to fall next week, turning traders’ attention to the potential of an early frost. While rain may still be beneficial to many fields, a quick return of sunshine is needed to finish out the crop and minimize quality degradation on open boll cotton. Therefore, traders will be watching Texas weather closely.

Export Sales Rebound

This week’s U.S. Export Sales Report, which covers the week ended September 14, revealed U.S. shippers had sold 335,400 bales of Upland and Pima cotton for shipment in this marketing year and next. Upland bales accounted for 209,900 of the sales for the current marketing year. Turkey was the largest buyer at 91,300 bales thanks to a Cotton USA event held there last week. At a minimum, this week’s healthy export sales imply that last week’s low sales figure was probably just a matter of prices having outrun the mills’ interest level. December futures fell from 75.75 to 68.31 in the reporting period, and we can thank the lower prices for reviving demand.

Will Export Sales Levels Continue?

Traders will continue to monitor rainfall and temperatures in Texas even as weather risk fades elsewhere. As always, weekly export sales will figure centrally. With U.S. export competitors expecting larger crops, traders will be looking for any signs that foreign growths are taking U.S. market share. Early, high-grade cotton is still earning a premium in the cash market as exporters are still scrambling to meet immediate needs before the harvest ramps up.

In the week ahead:

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

Friday, Sept. 15

Nearby futures contracts started the marketing week by settling under pressure. December cotton opened higher and moved to an intraday high of 69.30 cents per pound, but it was short lived as sellers returned. The contract traded on both sides of unchanged, but the sellers prevailed, and December settled at 69.07 cents, down 5 points.

Monday, Sept. 18

Market bulls were in charge following the weekend, although December cotton opened slightly lower and traded on both sides of unchanged for a while. The contract moved to a high of 69.95 cents while trading in a 115-point range and settled at 69.50, up 43 points. March cotton did better and settled 91 points higher at 68.90 cents.

Tuesday, Sept. 19

Futures settled lower in a relatively quiet, two-sided session. December initially moved to modest gains and an intraday high of 69.65 cents before sellers returned. The contract occasionally moved back to positive ground but could gain no traction. December settled at 69.27, down 23 points, and March cotton settled 60 points lower at 68.30.

Wednesday, Sept. 20

It was apparent buyers and sellers were on the sidelines based on light volume at the Intercontinental Exchange (ICE) as the market continued to consolidate following last week’s supply and demand reports and the resulting price slide. December cotton settled 2 points lower at 69.25 cents, but March settled 21 points higher at 68.51 cents.

Thursday, Sept. 21

December opened higher but met resistance and slowly moved lower before a sharp sell-off occurred. While trading in a 132-point range, the contract fell to a low of 68.18 cents then settled at 68.25, down 100 points. March cotton settled at 67.58, down 93 points.