Rose on Cotton
Posted : June 15, 2021




The ICE Dec cotton contract picked up 10 points on the week, finishing at 83.32 as the July – Dec inversion gave way to carry of 120.  The Dec contract lost 174 points during May.  Last weekend, our proprietary model (timely results provided in our complete weekly report) predicted a finish that would be near unchanged to higher Vs the previous Friday’s settlement, which proved to be correct, at least technically.

The cotton market was very near unchanged for the week amid beneficial rains across portions of Texas, good sowing progress, better than expected US export data, a worsening drought across Brazil, and a significant increase in ICE certificated stocks.  Overall, trading action was downright boring.

On a more interesting note, we found out this week that Focus Economics has rated Rose Commodity Group the most accurate in forecasting corn price (futures) for 2020. This is high praise, but serendipity likely played a not insignificant role.  Nevertheless, we are listing the award on our website over the weekend.

Domestic planting progress remains nearly on par with the expected pace, but the Mid-south is significantly off its rolling 5-year average pace.  West Texas is expected to receive its vaunted annual Memorial Day rains, with many areas already having received significant rainfall over the past two weeks.  The Mid-south received beneficial rains late this week, but acreage is still down.  The lower southeastern states continue to see hot and dry conditions, but some relief may be in store.

Net export sales were higher Vs the previous assay period while shipments were lower at approximately 184K and 341K RBs, respectively.  New crop sales were higher at around 92K RBs; running total is now 1.92M RBs Vs 2.82M last year.  The US is 103% committed and 81% shipped Vs the USDA’s 16.25M bale export projection.  Both sales and shipments were just ahead of the average weekly pace required to realize the USDA’s target.  Sales and shipments are ahead of the long-term average pace for this point in the season.  Cancellations were negligible.

Australian cotton production is expected to be notably higher this season Vs last, with official projections near 4.25M 480lb bales.  Conversely, a 100-year drought continues to plague Brazil and cotton production seems certain to be affected.  Perhaps a shortage of Brazilian cotton will force China to rethink its position on its banning of Aussie imports.

For the week ending May 25, the trade reduced its futures only net short position against all active contracts to around 13.3M bales while large speculators reduced their aggregate net long position to around 3.5M bales.

For an in-depth analysis of CFCT data see our weekly CFTC analysis and commentary.

For next week, the standard weekly technical analysis for and money flow into the July contract remain bearish.  The weekly US export report, weather forecasts and conditions, index fund rolling, and planting progress are likely to be potential market moving factors next week.

Given talk of major acre reductions in the delta and uncertain weather in Texas, producers can likely count on seeing the market trade in the 80s through June. All eyes will clearly be on the June 30 planted acres report, and we’ll be tuning up our crystal ball in advance of that date.

Have a great (and safe) holiday weekend!

Report Courtesy: Rose Commodity Group

With well over 60 years combined experience in the commodity trade, the partners of the Rose Commodity Group offer a wealth of knowledge and perspective to their clients. With expertise and direct experience in agronomy, crop production, futures and options, spot trading, hedging, shipping, and insurance, the Rose Commodity Group approaches marketing and risk management from a comprehensive perspective. Rose Commodity Group is not directly affiliated with any other commodity firm; we are not commission futures brokers. Our strategies and advice are based entirely on our client’s specific needs and goals.

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Disclaimer: This publication is presented for informational purposes only.  While the information contained herein is believed to be accurate and factual, the possibility of error exists. Commodity trading is an inherently risky proposition and there is no guarantee that trades based on the information herein will result in profitable outcomes.

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