PCCA Cotton Market Weekly
Posted : August 07, 2020

JULY 24, 2020


  • Political Tensions Between U.S. and China Continue
  • Low Foreign Cotton Prices Take Toll on U.S. Export Sales
  • All Eyes on Approaching South Texas Storms

Average daily trading volume fell to the lowest level in five years this week as the summer doldrums continued. December futures touched a low of 61.60 cents per pound Monday but then attempted to rally. After marking the week’s high at 63.46, prices fell back again. December futures settled at 61.92, down 62 points for the week. Despite the low trading volumes, open interest rose 3,728 contracts to 177,915.


Markets cheered a coronavirus aid package in the European Union this week. Further progress was made on a second round of U.S. Federal legislation, although there are still negotiations to be done. Continued Chinese purchases of corn and soybeans have also been encouraging, but another escalation of tensions between the U.S. and China continued to overshadow the market. The U.S. has told China to close its consulate in Houston and China will certainly retaliate. Additionally, this week’s unemployment claims were higher than hoped and the continued spread of coronavirus increases the odds of recovery slowing rather than speeding up. Accordingly, investors continued to move toward safe-haven investments and the yield on U.S. treasuries is back at recent lows.


Foreign cotton prices are the cheapest in years in comparison with current U.S. offers in the export markets, and the price disadvantage is still taking its toll on U.S. export sales. This week’s report showed net sales reductions of 13,100 Upland bales for the outgoing 2019/20 marketing year and just 10,900 bales of new sales for 2020/21. Reported shipments also came in a bit below expectations at 271,300. There are two reports left for the 2019/20 marketing year. The 2020/21 marketing year begins August 1.


Monday’s Crop Condition Report showed a small but surprising improvement in the crop condition data. Texas is still in terrible shape with just 28% of the crop rated “good” or “excellent”. The reduction in Texas cotton rated as “poor,” which came down 9 percentage points for the week to just 27%, may simply reflect acres that have been abandoned and plowed under, and hence no longer counted.

The Southwest weather pattern broke this week, but lacked a general rain from strong fronts moving through. Instead, locally heavy rainfall from pop-up thunderstorms benefited scattered areas. The outlook for additional precipitation is better this week too. The Southwest monsoon has provided moisture, and the Texas and Oklahoma panhandles and Kansas are benefiting. There is also a tropical system crossing South Texas this weekend, and we are likely to see heavy rains along the Gulf Coast or across the Southern tip of Texas, depending on what track the storm takes. Behind this storm, tropical storm Gonzalo is off in the Atlantic. Gonzalo is likely to weaken in the Caribbean but could re-strengthen in the Gulf of Mexico and could become an issue for South Texas.


Weather will continue to be a central focus next week. West Texas and Southwest Oklahoma still need more rain, but South Texas is quickly approaching harvest. Traders will also be closely watching export sales to see if China and Vietnam’s absence from the past few weeks’ sales will continue. Otherwise, there is little action expected from the cotton market itself and outside market developments may be the main source of intra-direction.


  • Friday at 2:30 p.m. Central – Commitments of Traders
  • Monday at 3:00 p.m. Central – Crop Progress Report
  • Thursday at 7:30 a.m. Central – Export Sales Report
  • Thursday at 2:30 p.m. Central – Cotton-On-Call


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