Posted : November 23, 2022


Aug 29, 2022

Louis W. Rose IV and Barry B. Bean

The ICE Dec cotton gained 167 points on the week (2155 over the last 3 weeks), finishing at 117.68, with the Dec – Mar inversion expanding slightly to 331.  Last weekend, our proprietary models predicted a finish on the week that was to be near unchanged to lower Vs the previous week’s settlement, which proved to be incorrect.  However, we overrode our model’s call and recommended a long position for the week.

The cotton market moved higher on continuing concerns regarding US and world aggregate production.  Surging US currency, Fed statements suggesting aggressive action on inflation, negative US GDP growth for Q2, rumors of waning demand, and certified acreage of around 13.5M acres in the US limited upward movement early in the week.

This season’s first dissemination of USDA-FSA acreage data shows that US planted area is northward of 13.5M acres – 750K above the USDA’s June 30 acreage report.  This number will get larger in Sept.  However, most of the increase is across Texas, with significant increases also noted across Arkansas, Louisiana, and Oklahoma.  This suggests that production estimates may not move much higher than currently projected, given overall crop condition and abandonment in these regions.  Texas had probably planted more than 7.8M acres, much of which has been (or will be) abandoned.

Domestically, the tropics have been quiet this season, with a near-term threat having been averted.  However, the Atlantic Basin is lighting up with activity, which could keep premium in the market.  Most of the US crop would benefit from decreasing rainfall and arid conditions as producers consider when to defoliate.

For the week ending Aug 21, the US crop was rated in 31% good, or better, condition, Vs 34% for the previous assay period and 71% Vs last season.  The condition of the Texas crop is rated in 59% poor to very poor condition, with almost none of the crop rated in the excellent category. 

The USDA badly bungled the export sales report for the week ending Aug 18. The new dissemination mechanism appears to have doubled some numbers, and to date, no one (including the USDA) knows what the correct number should have been.  However, on-call data for the week ending Aug 19 strongly suggests that sales will not be impressive (whenever we get the corrected numbers). USDA initially posted 7-figure sales and shipment figures which were simply unrealistic and likely beyond the realm of possibility.  It took USDA until after the market settled on Thursday to retract the data, which raises the question of gains and losses on bad data during Thursday’s session.

We continue to hear reports and rumors of slowing mill use across Southeast Asia and India.  We do not expect this to reverse over the near- to medium-term.  Brazil may sow as much as 4.3M acres of cotton for the upcoming season, but this is tempered by the continuation of droughty conditions across many locations of the country.  In other news, cotton exports of long staple cotton from Egypt have doubled year-over-year, with the primary buyer being India.  India’s importing further relays that the country is having a rather tough growing season.

For the week ending Aug 23, the trade notably increased its futures only net short position against all active contracts to almost approximately 7.7M bales, which signals further selling by producers. Large speculators increased their aggregate net long position to around 4.8M bales.  

For this week, the standard weekly technical analysis for the Dec contract is now supportive to bullish; money flow remains positive.  We will likely see some forerunning/position evening ahead of the Sept WASD report, which is scheduled for release on Sept 7, later this week.

Our advice to producers in the coming week is simple. If you’ve sold 50-60% of expected yield, you’re where you need to be.  Volatility, quality concerns, and the absence of a Texas crop should provide rallies and opportunities as we move into the harvest period. This season shows every sign of being a season that richly rewards early cotton, and should continue to reward high quality cotton into the season with a strong basis and rallies.     

Have a great week!

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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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