December 15, 2020
By Don Shurley, University of Georgia Cotton Economist
Last week was the best week news-wise for cotton in quite a while. USDA’s monthly production estimates finally showed the lower US crop that many have long said was out there. Supply/demand projections also showed a rebound in World Use/demand.
The nice build-up in prices, especially over the past 6 weeks, has been due to increased optimism in demand side factors. Now, we also finally have validation of a smaller than previously expected US crop and improved demand estimates to boot.
Last week’s USDA numbers (in combination with a good export report) finally gives the market more confidence that those expectations might be reality. In other words, the stage now seems set for a new more optimistic tone to the market.
March futures closed above 74 cents for the first time last week. The 73 to 74 cents area has been seen as an important hurdle (target). Prices (March futures) gained 2 ½ cents for the week—aided by a 107 point gain on Wednesday prior to the reports followed by a 121 point gain on Thursday.
In summary, Thursday’s monthly USDA 2020 crop year estimates for December included:
Last week’s export report (for the week ending Dec 3rd), showed strong sales and shipments (both the 2nd highest of the marketing year thus far).
Major buyers were destinations in China and Pakistan. Major export destinations were also China and Pakistan.
Mood and tone seems optimistic- but we must watch and consider carefully how higher prices might impact exports and Use.