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.

November 22, 2017

 

Futures Rally to 10-Week Highs

 

Cotton futures made up for the shortened trading week with heavy trading volume and a rally to 10-week highs. December futures led the way upward, spiking to 72.52 cents per pound on Tuesday as mills fixed their remaining purchase commitments against December ahead of First Notice Day on Friday. March futures rose less vigorously Tuesday and only rallied to 71.34 cents. At one point, December futures prices traded at a premium of 1.49 cents above March. Nevertheless, March futures surpassed December in Wednesday’s rally, advancing to 71.76 while December failed to make a new high and slid back to settle at 70.74. For March, Wednesday was the fifth consecutive session with higher highs and higher lows.

Harvest Continues to Progress

Harvest has progressed at a steady clip as last week’s drizzly weather failed to significantly hamper progress up here on the plains. Across the Cotton Belt, harvest progressed 10 percentage points to 74 percent, which is two points ahead of the five-year average. Texas advanced 12 percentage points to 67 percent, which is seven points ahead of the five-year average and a surprising 21 percent ahead of this point last year. Oklahoma and Kansas also made good strides but still lag a little behind their averages. Oklahoma had harvested 60 percent as of last Sunday, and Kansas had harvested 39 percent.

Mixed Yield and Quality Reports

Yield and quality reports have been mixed. While growers in the Northern Plains have struggled with low micronaire and the lighter weights that go with it, reports have been generally good in other regions. On the first eight million bales classed, the predominant color and leaf has been 31-3 while average staple length has been 36.7. Mid-South and Southeastern producers have reported slightly disappointing yields in the southernmost areas. However, better-than-expected production in the North Delta and Atlantic Coast probably will offset lower production in Louisiana, Southern Mississippi, etc.  Crop analysts seem to expect USDA’s total Memphis/Eastern production to stay the same despite state-level revisions.

Export Sales Report Delayed

USDA will release this week’s Export Sales report one day later, on Friday morning. The futures markets, government offices, and financial institutions will close in observance of Thanksgiving. We here at PCCA also are thankful, so we will be observing the Holiday, too, which means we are publishing Cotton Market Weekly before the Export Sales Report is released. Although we do not have the results, market watchers are expecting another week of excellent U.S. export sales as demand for U.S. cotton is still strong.

Upcoming Reports

With the December futures contract practically gone, merchants’ attention will turn more fully back to cash markets. Any traders not lucky enough to have Friday off will be keenly watching this week’s export sales figure. Friday’s Commitments of Traders report from the CFTC also will show whether speculative buying was to blame for the rally, at least up to Tuesday’s close when the data for that report is collected. Monday’s Crop Progress report will be the last of the season. From there, daily classing reports and next week’s export sales figures will retain the most importance until traders’ focus turns to the December 12 Crop Production and World Agricultural Supply and Demand Estimate (WASDE) reports. Most market watchers were surprised by the strength of the breakout, but still expect cotton to trade in a range between the level where producers are happy to price unsold cotton and mills are happy to start fixing prices on their purchase commitments.

We wish all our readers a Happy Thanksgiving.

In the week ahead:

  • The Crop Progress report 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 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.

Friday, Nov. 17

Nearby futures contracts at the Intercontinental Exchange (ICE) settled higher for the third consecutive session. March cotton traded on modest gains but in a narrow range early before buying increased, sending the contract to an intraday high of 69.75 cents per pound and its highest level since Sept. 12. March moved off its high but continued to trade in the top half of its 69-point range and settled 17 points higher at 69.35 cents.

Monday, Nov. 20

March cotton opened slightly higher, but light selling moved the contract off its high and back to middle to lower end of a narrow range. Strong support returned and enabled March to break through recent support levels and move to sharp gains. With additional support late in the session, the contract reached a high of 70.92 cents in the final minutes of trading before settling at 70.85 cents, up 150 points.

Tuesday, Nov. 21

March surrendered almost half of its gains from the previous session as liquidation of the December contract added volatility to the market. March opened lower and continued to fall before buying lifted it to moderate gains. The contract then met resistance, and selling intensified. March settled 71 points lower at 70.14 cents.

Wednesday, Nov. 22

March cotton was mixed in early trading, struggling to find direction before buyers lifted it to an intraday high of 71.76 cents. During the remainder of the session, the contract traded in the top half of its 188-point range and settled at 71.14 cents, up 100 points. All other contracts settled with strong to moderate gains except the soon-to-expire December, which settled 16 points lower at 70.74 cents.