Cotton prices will rally for yet another week, albeit at a slower pace and in lighter volume. Since falling to a low of 70.21 on October 31, December futures have rebounded eighteen cents closing Friday at 88.20. While doing so its managed to drag both March and May futures with it each settling at 86.33 and 85.56, respectively. In a week filled with contentious outside noise any gains are deemed impressive.
Market Movement from 14th Nov 2022 to 19th Nov 2022.
• NY December gained 300 points on Tuesday, but came down in last two days of the week due to poor US export sale and some technical resistance. Ultimately NY December lost 304 points during the week. Now NY March is front month for hedging. NY March-23 also lost 255 points during this week
• US export sale was very poor at just 25,000 bales. It seems at higher rate demand is very low. Poor Us export sale affected NY future sentiment.
The lack of demand remains the overriding factor in the cotton market and there is still no improvement in sight. The USDA still needs to adjust its global mill use estimate to reality, which means cutting it by possibly as many as 8-10 million bales from the current 115.6 million bales. We don’t claim to know at what level demand is, we just go by what mills are telling us, and it’s depressing!
• October was month of continuous down trend. NY December future lost about 1300 points during the month. USDA WASDE was bearish. USDA reduced world consumption by 3 million bales so world ending stock was also up by 3 million bales. Recession fear in Europe and America has created downward sentiment.
• US Export sales was poor also some cancellation from China reason for downtrend. But US is well committed to reach USDA export target.
Considering that the US dollar dropped and the stock market rallied, cotton underperformed today, which could be sign that this impressive two-week rally might be running out of steam.
The spread compression is probably going to continue and we might end up with a flat board somewhere in the low-to-mid 70s. New crop December should provide a backstop for the entire board, as traders are not likely to aggressively short new crop below the cost of production. Also, the difference to corn and soybeans is massive and this will reduce cotton acreage next season if maintained.
Cotton season 2021/22 was a very challenging one. Cotton market opened at its historically high level and climbed up to create a new historical high of Rs.100,000 plus per candy. Hence it proved that is very difficult for even experts to predict top and bottom of the cotton market. Market finds its own level.
Market Movement from 06th Jun 2022 to 11th Jun 2022.
• This week was bull dominated week in NY future.
• Market rose after US export sales report. During the last two weeks U.S. export sale showed unexpected rise. Still 27000 contracts are to be fixed for July future and time is running out. July option has expired.
December is approaching key support at 82.54 cents, which is the mid-July low. If it holds, which we expect to be the case, we might get a decent bounce. However, upside potential seems limited as long as we have slow demand, a strong dollar and weak economic growth.
Inflation Worries Smash Price Support September 20, 2022
The 1990’s saw a Louisiana man become famous for coining the phrase, “It’s the economy, stupid.” In fact, James Carville’s saying resonated such that he was credited with the election of Bill Clinton to the Presidency of the United States as, day after day, Carville hammered home the phrase.
Market Movement from 03rd Oct 2022 to 08th Oct 2022.
• NY December remained highly volatility with limit up on Tuesday and limit down on Wednesday but ultimately managed to contain its loss to just 111 points during the week. Macro-economic worry make market sentiments dull. Despite good US export sales, market closed in red. On last day of trading NY Dec traded below 82 cents but managed to close in green.
• BEST FIVE-DAY GAIN IN THE LIFE OF THE DECEMBER ’22 CONTRACT • CPI DATA BIG NEWS IN THE MARKETS • FIRST FOUR DAYS OF NEW MARKETING YEAR NET 102,400 BALES
Cotton futures made a fairly steady march higher, with their largest gain on Thursday when December futures rallied to limit up mid-day. The consistent movement higher left last Friday’s low of 94.22 cents per pound as the week’s low and Thursday’s high at 104.94 cents as the week’s high.
COTTON MARKET POSTS LARGE WEEKLY GAIN, SMALL MONTHLY SETBACK
Aug 29, 2022
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.
Market Moves Higher with Little Economic Data July 25, 2022
Over the past few weeks, the market resembles a rusty old truck trying to climb a rainy dirt road. Each time it seems to gather traction, it slips and slides further down the hill. That is until last week when it posted its first positive performance in six weeks.
Ten days ago, in this space my headline said “Prices Should Begin To Find Direction Soon”. Direction has now been realized as prices have gained significantly—giving growers new hope after we were in the upper 80’s just a few weeks ago. Dec futures gained 12.46 cents last week and were up the limit of another 5 cents today.
The cotton market saw a split trade Tuesday as spot July was lower, while December cotton ended slightly higher. Spot July is gearing up for export sales, supply-demand data and its options expiration on Friday. December is geared more towards Texas weather and the U.S. dollar.
Market Movement from 02nd May 2022 to 07th May 2022.
• Another highly volatile week in NY future. Front month July almost touched 156 cents on Wednesday, a new contract high and came limit down on Thursday and also closed in red on Friday. Downfall in equity market, higher dollar and profit booking pushed the cotton futures downward. Despite higher export sales and shipment market finished in red.
Cotton nearly traded limit-up Wednesday (5 cents) as news that India would allow duty-free imports to enter its country jolted the market. According to certain newswires, the government is attempting to overcome its shortfall in production by encouraging domestic mills to bring in foreign cotton tax free.
Market Movement from 09th Jan 2022 to 15th Jan 2022.
• NY future continues with bull domination. Neutral to bullish WASDE and excellent export sales were main factors for bullish week on NY cotton futures. Lot of fixations pending for March and time running out so mills are in hurry to fix the rate. March NY closed on contract high crossing 119 cents marks with weekly gain of 458 points.
The cotton market finished higher Wednesday as outside market forces were markedly higher. To that end, the Chicago grains are nearing 10-year highs. Their upside potential is being fed by bullish South American weather and fears over Ukraine. All together those fundamentals spell inflation.
Old crop May futures currently stands at roughly $1.21. New crop Dec is at roughly $1.03. May was down 3.39 cents for the week through yesterday, recovers up today, but still down for the week.
Still, recent events and news has been mostly positive for prices and while this week’s decline can be (and perhaps should be a little) concerning, the price outlook still appears to be mostly positive and encouraging.
ICE Cotton futures drop as investors roll positions
ICE cotton futures fell nearly 1% on Monday as investors rolled over their positions from the front-month contract, while the focus turned to a closely watched federal monthly supply and demand report later this week.
The front-month contract on ICE futures for March was down 1.20 cents, or about 1%, at 125.54 cents per lb by 12:08 EST. It traded within a range of 125.41 and 126.94 cents a lb.
The cotton market closed slightly lower Wednesday following the February USDA WASDE report, which was released at 12:00 p.m. EST. Basically, U.S. cotton stocks increased some 300,000 bales, but global stocks declined by 700,000-plus bales. Here is the report summary from USDA’s website.
The cotton market was off less than 0.50 cent, despite the fact the Dow Jones collapsed over 1,100 points! The bearish driver of the Dow was the potential that Russia invades Ukraine. Monday, many NATO countries are sending supplies and troops toward Ukraine as a deterrent to the Russians.
PRICES LOOKED RESILIENT IN FACE OF OUTSIDE MARKET TURMOILEXPORTABLE GOODS COMPETITIVELY PRICED • STOCK MARKETS PRODUCED MINOR PANIC EARLY IN WEEK • VIETNAM, INDIA AND CHINA BIG BUYERS FOR 2022/2023 MARKETING YEAR • WEST TEXAS, KANSAS, SOUTHWEST OK STILL DRY AFTER SNOW
Market Movement from 17th Jan 2022 to 22nd Jan 2022.
• Another week of huge volatility on NY cotton future market.
• NY March posted contract high and decade high to 124.75 intraday on Wednesday. Indian agency has reduced Indian crop size which also was taken positive by NY future market. Technically now new top so, some short covering; some mill fixation has triggered new high. Thursday and Friday there was correction due to profit booking.
Today’s on-call report is worrisome, since it showed that very little progress has been made with March fixations. This will most likely lead to further price spikes due to sell-side illiquidity, as trade shorts (mill fixations) still have to cover over four million bales in a matter of just 3-4 weeks.
The cotton market unfolded a triple-digit retreat Thursday, as its overbought condition caused some traders to liquidate. Even positive outside markets, such as the recovering Dow Jones, as well as higher Soybeans and crude, could not dissuade traders from selling long positions. Of course, with the market posting a near 10% gain so early in the year, it’s generally thought correction of some degree would be healthy towards the longer-term trend.
• ATTENTION ON FEDERAL RESERVE OVER NEXT FEW QUARTERS • PRICE DROP REVAMPS MILL INTEREST IN U.S. COTTON • CROP CONDITIONS DECLINE SLIGHTLY THIS WEEK
Futures prices plummeted to a fresh low of 88.10 cents per pound this week. Traders seemed to make up for a shorter week by stuffing more selling into Tuesday and Wednesday’s action. Prices seemed to find their legs on Thursday as the outside markets had some relief.
Market Movement from 03rd Jan 2022 to 08th Jan 2022.
• Another volatile week with upward gain in NY future. Tuesday NY March crossed 117 cents marks intraday, though could not sustain but still was able to remain near to second highest close. Support from outside markets, renewed interest of speculators in cotton and some fundamental supported NY futures to close in green weekly. NY March closed the week with 252 points gain.
MARCH FUTURES SETTLE UP 38 POINTS FOR THE WEEK • MIXED WEEK FOR OUTSIDE MARKETS • EXPORT SALES WERE HEALTHY SHIPMENTS ARE STILL A DISAPPOINTMENT • WINTER WEATHER AND DRYNESS ARE HERE
FUTURES MARKET ACTIVITY
March futures made a fresh multi-week high on Tuesday, pushing up to 117.68 cent per pound. Unfortunately, momentum did not hold. With the outside markets softening Wednesday (more on that below), cotton prices moderated as well. March futures settled at 114.72 cents on Thursday, up 38 points for the week.
Another year has come and gone at breakneck speed. Like its predecessor, 2021 was far from uneventful. An overheated economy drove consumer prices to their highest level in almost four decades.
Last week’s market activity closely resembled that of the previous week. Trading in a wide range of five cents from low to high, small gains were captured despite an abbreviated holiday schedule. Current crop advanced a cent and half while new crop gained half a cent, closing at 109.12 and 90.71 respectively.
The market is trading in thin volume during the holiday period and this can lead to some volatile price moves. The chart has started to look more constructive over the last three sessions, but we need to see more volume and a jump in open interest before we can make a bullish case.
COTTON MARKET FINISHES HIGHER AHEAD OF CHRISTMAS BREAK
December 24, 2021
The ICE Mar cotton contract gained 182 points on the holiday-shortened week, finishing at 109.12, with the Mar – May inversion strengthened significantly at 207. Recall that a market inversion relays that demand for cotton nearby is perceived to be greater than in the future. Last weekend our models predicted a finish on the week that was to be near unchanged to higher Vs the previous Friday’s settlement, which proved to be correct.
Supply chain bottlenecks, which still persist, have distorted the supply/demand picture and given us the impression that we are running out of cotton, when in fact we are only running out of readily available cotton at destination, while supplies are bunching up at origin.
Prices Showing Nice Recovery, Outlook Still Uncertain and Volatile
December 30, 2021
Old crop March futures hit just shy of $1.13 today—up 294 points (2.94 cents per lb). New crop Dec futures closed at 91.65 cents—up .35 cents.
We don’t want to and shouldn’t make too much of a single day activity. But, look at what has happened just over the last 3 days this week—Mar22 was up 3.16 cents on Monday, then down 2.23 cents on Tuesday (yesterday), and now back up 2.94 cents today.
Market Movement from 27th Dec 2021 to 01st Jan 2022.
• This week was driven by bulls. During holiday week market was highly volatile with low volume. NY March Future moved triple digit up and down almost every day. ULTIMATTLY NY March closed with 348 points gain during the week.
\Cotton set for third weekly rise as Omicron fears ease
ICE cotton futures rose on Thursday and were on track for a third straight weekly gain on strong demand outlook for the natural fiber as worries over the Omicron coronavirus variant eased.
After building a base for the last two weeks, the market took off today, which should take any further spec selling out of the game for now and might invite some new buying, both from the spec sector as well as mills, who seem to have missed an opportunity to fix a bigger portion of their March exposure.
Cotton continues to have a laundry list of fundamentals that support the bullish side of the price equation. There are bearish ones as well, although I am challenged to think of any…but the silent spring lingers. The price deck just does not seem to have all 52 cards, and when I do count 52, a couple of them, once turned over, are jokers.
COTTON MARKET AGAIN FINISHES MODESTLY HIGHER, MANCHIN KILLS “BUILD BACK BETTER”
December 20, 2021
The ICE Mar cotton contract picked up 107 points on the week, finishing at 107.30, with the Mar – May inversion strengthened at 160. Last weekend our models predicted a finish on the week that was to be near unchanged to higher Vs the previous Friday’s settlement, which proved to be correct.
Low volume trading yielded little in the way of price movement for most of last week. That was until Thursday when, for no explainable reason, Christmas came early as March futures traded limit up. Unfortunately, absent any follow through trading on Friday, the Grinch snatched back most of these gains leaving March up a penny on the week and December unchanged at 107.30 and 90.04, respectively.
The ICE Mar cotton contract picked up 203 points on the week, finishing at 106.23, with the Mar – May inversion effectively unchanged at 130. Last weekend our models predicted a finish on the week that was to be near unchanged to lower Vs the previous Friday’s settlement, which proved to be incorrect. However, we did not recommend trading any bias ahead of the Dec WASDE release.
Uncertainty and panic over the OMICRON variant caused the cotton market, along with many other commodities, to drop significantly in price over the past 2 weeks.
PRICES RALLY OFF OF LOW OF THE WEEK, UNABLE TO HOLD MUCH GAIN • MARKETS BELIEVE OMICRON RISK LESS THAN ORIGINALLY FEARED • DEMAND FOR U.S. COTTON REMAINED HEALTHY THIS WEEK • LITTLE CHANGE FROM WASDE REPORT
Market Movement from 06th Dec 2021 to 11th Dec 2021.
• NY March started this week with triple digit gain and hold the gain throughout week with minor changes in last four days. Ultimately closed at 106.23 with 203 points gain.
• WASDE was generally neutral with minor changes. A small quantity in US crop increased.
This bull market has been built on four main pillars, namely spec longs, Chinese buying, a large unfixed on-call sales position and inflation expectations.
With speculators currently reducing their net long exposure and with Chinese buying reportedly turning a bit more tepid, the bulls currently rely on support from mill fixations and inflation expectations.
The cotton market ended Thursday slightly lower, despite neutral to friendly supply-demand numbers. Essentially, USDA kept domestic ending stocks unchanged at 3.40 million bales, but did slash world carryout some 1.20 million bales.
The cotton market is lower Wednesday morning as some traders square up for Thursday’s USDA report. First off Thursday, at 8:30 a.m. EST, the market will see new export sales numbers, followed by the December Crop Report at High Noon.
Market Movement from 29th Nov 2021 to 04th Dec 2021.
• NY futures declined sharply during the week. NY March lost 758 points with limit down on Tuesday and 200 points loss on Wednesday. Market worried about spread of new omicron variant Covid. some comment of fed chairman regarding tapering to control inflation and technical sell signal on chart has created panic. Reduction of open interest shows liquidation of funds by speculators.
COTTON MARKET CONTINUES SKID AHEAD OF DEC WASDE RELEASE
December 04, 2021
The ICE Mar cotton contract gave up 758 points on the week, finishing at 104.20, with the Mar – May inversion weakened at 129. The Mar contract lost 481 points in Nov. Last weekend our models predicted a finish on the week that was to be near unchanged to lower Vs the previous Friday’s settlement, which proved to be correct.
The hope of a post-holiday market rebound was dashed as the selloff continued last week, highlighted by a limit down move of five cents on Tuesday. Since hitting an intraday trading high of 118.50 three weeks ago, March futures has given up over 14 cents closing the week at 104.20, a decline of almost 15 percent. New crop prices fared somewhat better but still dropped below 90 cents as December 22 futures settled at 87.75.
Speculators have started to reduce their net long and it remains to be seen whether their exodus will continue or whether they suddenly find renewed interest in our market. A lot will depend on the macro situation and whether financial markets can keep their composure. So far investors don’t seem too concerned as they are still buying the dips.
It’s not just cotton. All commodities and the US stock market as well, are reeling from news of a new virus strain. Should growers be concerned? Yes. Will prices recover? Likely, but when and how much. And will the market fall further before a recovery?
The cotton market saw several of its contract months end at limit down Tuesday, amid growing fears over the omicron variant, plus disturbing comments from the Federal Reserve. Chairman Jerome Powell suggested that inflation was no longer considered transitory and that the Fed’s tapering process needs to be implemented quicker.
The ICE Mar cotton contract gave up 465 points on the holiday-shortened week, finishing at 111.78, with the Mar – May inversion strengthened at 185. Last weekend our models predicted a finish on the week that was to be near unchanged to higher Vs the previous Friday’s settlement, which proved to be incorrect.
Market Remains Strong Among Rising Economic Concerns
November 22, 2021
Most of last week’s market activity centered around the liquidation of the December contract. Up to this point, there have been no surprises and with First Notice Day only a day away, little is expected as it fades into history after a monumental run. In the meantime, the March contract posted a new closing high at 116.92 during the week to settle Friday only a few points shy at 116.43, for a gain of 135 points.
MARCH FUTURES NOW CENTRAL FOCUS • JOBLESS CLAIMS FELL BELOW 200,000 FOR FIRST TIME SINCE 1969 • DEMAND FOR U.S. COTTON REMAINED HEALTHY • EXPORT SALES REPORT COMING NEXT WEEK
Market Movement from 22nd Nov 2021 to 27th Nov 2021.
• This week was stable from Monday to Wednesday. Thursday market was close on occasion of Thanksgiving Day. Friday in short session market fall sharply on news of rise in covid cases in South Africa and many European countries. On Friday March NY gave up nearly 400 points. NY March closed with 465 points weekly loss.
With markets it’s often not what you know, but rather what you don’t know or the unexpected that can be most concerning. Last week’s cotton market was a perfect example. Trading rather passively leading up to Thanksgiving, most thought Friday’s abbreviated session would be a non-event as traders nursed holiday hangovers.
GOOD ECONOMIC NEWS AND VOLATILE INTRADAY ACTIVITYMARCH CONTRACT PERFORMS BETTER THAN DECEMBER • OPEN INTEREST DOWN 16,674 CONTRACTS • U.S. RETAIL SALES EASILY BEAT EXPECTATIONS • VIETNAM, TURKEY AND CHINA AMONG WEEK’S BIGGEST BUYERS • GROWERS MAKE SUBSTANTIAL HARVEST PROGRESS
Market Movement from 15th Nov 2021 to 20th Nov 2021. • Another volatile week on NY cotton future market. US future market shot up on news of possibility of India export ban but after cotton stake holders indecisive meeting with Union Textile minister market lowered to previous levels. Overall NY December gained 153 point and March gained 135 points during the week.
• With just only 194 bales certified stock December now going to notice period. March is lead month now and major volume in March contract.
The market has been trading sideways for the last three weeks and the December liquidation failed to cause a big spike as some have feared, despite zero certified stock on hand.
We therefore still feel that March will see a correction as we head into the holiday period, as mills are not yet ready to deal with their March fixations. China will probably still be there to buy the dips, which together with the large amount of outstanding mill fixations should provide decent underlying support.
Market Movement from 8th Nov 2021 to 13th Nov 2021. • This week was stable to bullish on NY future. USAD WASDE report was neutral and export sales was lower but bullish sentiment ignored it and market stayed higher. Ultimately NY December gained 82 points during this week while now lead month March gained 184 points in this week.
INFLATION IS HEADLINE OF WEEK FOR BROADER MARKETS • MARCH CONTRACT PERFORMS BETTER THAN DECEMBER • U.S. CONSUMER PRICE INDEX BEATS ANALYSTS’ EXPECTATIONS • WASDE HIGHLIGHTS • BULK OF EXPORT VOLUME TO CHINA
Cotton prices found a favorable move in front of the USDA November supply demand report and maintained that momentum despite a neutral report. The market continues to be dominated by the bullish cotton on-call sales position. Too, with just six trading sessions before first notice day (FND), the certainty of a squeeze on the December contract adds to the bullish short-term outlook.
We are still in a situation in which some trade shorts in December (mainly related to mill fixations) need to buy, while spec longs are still in no hurry to part with their positions. This might lead to further price spikes, as shorts are forced to pay up to entice sellers.
Greek mythology taught us that the legendary Icarus flew so high that the Sun melted his wings and he crashed to Earth. The Greek cotton industry is in a revival today, thanks to demand, and Icarus still soars.
Market Movement from 25th Oct 2021 to 30th Oct 2021. • This week was a bull dominated week. NY December Future remained green in all five sessions and closed the week with 659 points weekly gain. Good US export sales and some technical stop loss triggered to reach new high. Expiry of NY December option is in few days so now new hedge trade will be on ICE March future. March is inverted to December nearly 400 points. It shows tightness in current time.
COTTON MARKET SURGES, BUT THERE ARE BEARISH SCENARIOS Oct 30, 2021
The ICE Dec cotton contract picked up 93 points last week, finishing at 108.26, with the Dec – Mar spread inversion contracting to 207. Last week our models predicted a finish on the week that was to be near unchanged to lower Vs the previous Friday’s settlement, which proved to be incorrect, although recent volatility invites a discussion of what “near unchanged” means.
DECEMBER FUTURES FINISH WEEK AT 113.73 CENTS • Stocks Continued to Make New Highs This Week • Cotton Demand Remained Healthy for Week Ending October 21 • Texas Crop 40% Harvested • Cotton Now Entering Warehouses at Normal Daily Rate
When we look at the recent chart action, we see a steep rise of 2753 points between the September 20 low and the October 8 high, which was followed by an almost perfect 50% percent retracement when the market corrected to 103.50 cents on October 13.
From there December traded sideways into a pennant or triangle, from which it broke out over the last two days.
Market Movement from 18th Oct 2021 to 23rd Oct 2021. • Another highly volatile week with daily trading range of more than 300 to 400 points in NY future.
• Decent US Export sales but market ignored it and closed 400 points lower on Thursday. NY December ultimately closed with 93 points gain.
Not much has changed since last week, as neither the large spec and index fund long nor the sizeable trade short have been willing to reduce their exposure. The latest CFTC report still showed a big 19 million bale net position on both sides. The question is who will blink first?
With only three weeks to go until December options expiration, mills have their work cut out to reduce their still large unfixed on-call position in December and this could generate buying pressure.
PRICES MADE LARGE MOVES THIS WEEK • Excellent Week for Equities Markets • Export Sales Report Picks Up • Cotton Harvest Still Lags • Traders Examine Daily Classing Reports and Cash Market Offers
Although prices made large moves every day of the past week, December futures trading was relatively constrained to the range from Tuesday’s low at 105.25 cents per pound to Thursday’s high at 111.35 cents.
Market Movement from 11th Oct 2021 to 16th Oct 2021.
• This week was highly volatile with 4 out of 5 sessions ended in red. WASDE was bearish to neutral so usually market was down this week. Anticipating good export sale to China on Thursday market gained 300 points and on Friday morning limit up but after disappointing export sale numbers market gave up all gain. Ultimately NY December close with weekly loss of 327 points.
After getting close to a 50% retracement of the up move between 88.95 and 116.48 cents, the market has started to turn up again, which might force mills to become more aggressive with their fixations and/or upside protection via options.
Although there may have been some profit taking by speculators during this correction, the nearly unchanged open interest tells us that speculators have staying power and that time is working against the shorts.
With China probably coming back with speculative vigor after its week-long holiday and with the WASDE next Tuesday possibly showing some bullish corrections (Indian stocks and Chinese imports), it is difficult to see this rally coming to an end anytime soon.
DECEMBER FUTURES FINISH 581 POINTS UP FOR THE WEEK
• Stocks Struggled in Sideways Motion Until Thursday • Rains Delay Harvest to Slowest Pace Since 2013 • October Crop Production and WASDE Reports Next Week
Futures prices stalled slightly last Friday after making another fresh high. On Monday, the December contract found support at the week’s low of 103.58 cents per pound before turning higher.
Market Movement from 02nd Oct 2021 to 09th Oct 2021. • This week was also dominated by bulls. NY December crossed 116 intraday before closing the week just above 110 cents. Speculative run helped NY December to gain 607 points during the week. From 20 September to 8th Oct NY December gained nearly 22 cents. • US Export sales was lower with higher prices, mills stayed away from purchase or fixation. 2,60,000 bales sold and just 1,28,000 bales shipped.
*Seat at the Dollar Table Depends on Mother Nature*
*October 02, 2021*
With apologies to Mr. Rogers, “It’s a beautiful day in the neighborhood, a beautiful day in the neighborhood, want you be my Magic, Mr. Cotton…” Cotton has us just singing away as past and present demand has pushed and pushed the market to 11-year highs and that Magic Dollar level. Prices settled Thursday evening at 105.80, basis December futures, and were unchanged at Friday noon.
• U.S. Federal Spending and Debt Limit Fight Seem to Escalate • Export Sales Report Confirms Surge in Demand • 11% of Cotton Belt Harvested • Weather is Threat More to Quality than Quantity
While China has brought great uncertainty to the market and there might be some fundamental reasons for prices to move higher, this has clearly turned into a showdown between spec longs and trade shorts.
1. CHINA DOWNSTREAM TEXTILE SECTOR UNDER SEVERE STRESS FROM ENERGY RATIONING/LOGISTICS
2. “RECORD CONTAINER SHIPS DRIFTING OUTSIDE US WEST COAST PORTS”; ENERGY SHORTAGE SHUT TEXTILE PLANTS AND FREIGHT COST 25% OF RETAIL DENIM IS COOL; DEMAND DRIVING INCREASE IN COTTON USE
3. CFR BASIS LEVELS VERY ELEVATED AS 4th QUARTER 2021 ARRIVES
Open Interest Down 10,601 Contracts from Last Week Jobless Claims Higher Than Expected Net Upland Sales Total 345,400 Bales Share of Crop in Good or Excellent Condition Higher Than the Last Four Years
Market Movement from 20th Sep 2021 to 25th Sep 2021
• This week will be noted as highly volatile week on both sides. On Monday with fear of Chinese real estate giant’s default, market lost 331 points. Market recovered in next 3 days with support of Fed's support with no increase in interest rate and also huge buying by China. On Friday market jumped to its lifetime high on ICE December future closing at 95.99 cents gaining 366 points in a single day.
The technical breach on Monday flushed out some spec longs and allowed mills to fix a decent amount of their December commitments. This helped to defuse a potential short-squeeze, although mills are not quite out of the woods yet.
With financial markets quickly reverting to ‘risk on’, spec liquidation stopped, while mill fixations and possibly China buying lifted the market back into the 92-95 settlement range, where we had been in previous five weeks.
Market Movement from 13th Sep 2021 to 18th Sep 2021
• NY futures remained easy during week with lower volume. Speculator are now silent with market not able to cross technical resistance area. Overall NY December future closed with 117 points loss during this week.
• Export sales were decent around 3 lakh bales and shipment also better. China was among big buyers. But market ignored good US export sales and closed lower.
The market can’t seem to make its mind up, and neither can we! On the one hand we have this large spec net long position, which has the potential to squeeze mills who still have over 5 million bales to fix on December. If speculators were to hang on to their positions, then a lack of sell-side liquidity could force trade shorts to pay up.
The See-Saw at 90-Plus Continues – What Lies Ahead?
September 16, 2021
The strong uptrend in prices seems to have leveled out. Prices (Dec futures) have been in a range of mostly 92 to 95 cents for the past month plus. Dec closed at almost 95 cents back on August 17 but followed by at a close at 92.3 cents on September 1.
Last week ended at 93.5 cents—down 52 points for the week. So far this week (through today, September 15), Dec is down another 13 points to 93.37 cents.
Market Movement from 06th Sep 2021 to 11th Sep 2021
• Not much movement on NY cotton futures during this week. Market was lower on Thursday due to adjusting position before WASDE. Over all NY December closed this week with 52 points weekly loss.
• Bullish numbers of expert sale was ignored by market due to bearish WASDE report.
DECEMBER CONTRACT CLOSES WEEK AT 93.22 CENTS PER POUND
• Unemployment Claims of 310,000 as of September 4 • Total Export Commitments Still Lag Recent Year’s Pace • Texas Production Big Shocker on September Crop Production Report • 61% of Crop Rated Good or Excellent
Beginning stocks are slightly lower than last month in the 2021/22 U.S. cotton estimates, but a much larger increase in production means that both exports and ending stocks are higher than estimated in August. U.S. cotton production is forecast at 18.5 million bales, up 1.2 million bales despite a 4 percent decline in harvested area, largely due to increased projected yields in Texas. With both world trade and U.S. supplies higher this month,
We feel that after trading sideways in a 92-95 cents box for the last four weeks, December is getting ready to make a move. Tomorrow’s WASDE could provide the trigger if there are any surprises, but we also need to watch economic developments, which could trip up the spec long like it did in 2018.
While we can’t rule out another spike higher, we become increasingly concerned about an economic slowdown going forward and believe that it is prudent to start putting some downside protection in place.
After testing near term lows, the cotton market rallied at week’s end, settling above 94 cents, basis December futures. The attempt to climb to the magic one-dollar level is somewhat stimmed by the potential for the U.S. crop to climb to over 18 million bales. The current estimate is 17.3 million bales, but late as the crop is, Mother Nature could still give us an unusually late fall; thus, allowing for the plant’s very young fruit to develop harvestable bolls.
• Markets in “Risk-Off” Mindset Monday and Tuesday • Pakistan Biggest Buyer of Cotton This Week • 70% of Crop Rated Good or Excellent • USDA Reports Delayed for Labor Day
Market Movement from 30th Aug 2021 to 04th Sep 2021
• NY December future declined from Monday to Wednesday but when hurricane IDA passed without much damage to cotton crop, it recovered in last two sessions and closed this week with just 82 points loss.
• US Export sale was slow with just 119,700 bales sales for current year and only 23,800 bales sales for next year. Shipment also was down to just 173,300 bales.
Not much has changed since last week, as spec longs and trade shorts continue the standoff with their historically significant positions. This has boxed the market into a 92-95 cents window for the last three weeks.
The WASDE on September 10 could be the next trigger point, as most traders expect an upward revision of the US crop to over 18 million bales, but there could also be some bullish surprises, like a much overdue downward adjustment of Indian ending stocks.
Strong Prices Continue – So Far with Few Hiccups Aug 27, 2021
Most of the time, but not always, prices tend to trend down into the harvest months. It’s called seasonality and for that reason, farmers like to price some portion of their crop prior to harvest. How much varies from farmer to farmer and depends on how much risk he/she is willing to take on an unknown future.
This continues to be shaping up as one of those not-very-often years where farmers stand to enjoy both a good crop and at a good price.
Market Movement from 23rd Aug 2021 to 28th Aug 2021
• This week NY December future consolidated steadily and closed with 174 points weekly gain.
• US Export sale was also decent with new commitment of 2,59,400 Bales for current year and 67,900 bales for next year. But China remained absent in new sales. Good shipments above 2 Lakh bales.
DECEMBER FUTURES HIT HIGHEST PRICE SINCE MARCH 2014
• Concerns that “Transitory Inflation” is not so Transitory Arise • El Salvador Last Week’s Biggest Cotton Buyer • 79% of Cotton Belt Setting Bolls • Tropical System in Gulf of Mexico Key to Watch
Cotton just does not want to go down. Attempts to push prices below 93 cent have been short lived and have come without any muscle. Prices continue to creep back to 95 cents while keeping their eye on the 96-cent resistance level and the nearby objective of 97-100 cents. Additionally, prices continue to trade above all the moving average trend lines.
Spec longs and trade shorts have been keeping each other in check lately, as their positions have expanded to historically significant levels. Sooner or later this stalemate is likely to break, with the bulls seemingly having the better odds, at least that’s what the options market is telling us.
*Market Movement from 16th Aug 2021 to 21st Aug 2021*
• NY December extend rally post WASDE till Tuesday. On Tuesday NY December crossed 96.90 cents but gave back all gain sameday. Historically 96 cents proved great resistance. Profit booking by speculators pushed back the market and ultimately NY December closed with weekly loss of 122 points.
• Export sale was decent with 253000 bales for current year and 59500 bales for next year. While shipment also was decent at nearly 225000 bales.
Demand Driven Bulls Trample Over 93 Cent Resistance
August 14, 2021
Many thought USDA’s August estimate of the U.S. crop might be a scene from a “wild wild west shoot-‘em-up,” but everyone was bowled over, nonetheless. So much for the market not pushing above 93 cents until the September supply demand report! USDA’s August estimate was what I had expected the September report to look like. Kudos to USDA for biting the bullet.
It looks like we are headed for another showdown between spec longs and trade shorts, as their respective positions have been growing to sizeable levels.
The question is whether the outcome is going to be similar to 2011 or 2018? Ten years ago lower than expected Chinese stocks and spec buying fueled a historic short-covering rally. In 2018 we saw speculators bail from a 12.2 million bales net long position, which let the large trade short of around 20 million bales off the hook.
The market is screaming, I’m hungry. Feed me! It’s the time of year when we typically write about the Dog Days of Summer, mid-August, blistering hot, muggy, and simply uncomfortable, day after day. Cotton, loving that kind of weather, is adding weight to its heavy fruit load and the market can’t decide in which direction to move, but it is typically reluctant to move higher. Oh! Also, prices seem to be in the 70’s.
Market Movement from 07th Aug 2021 to 14th Aug 2021
• After last week's consolidation, NY December saw another bullish week gaining 262 points during the weekly and closing at 94.32 cents per pound a new lifetime high of the contract.
DECEMBER FUTURES FINISH WEEK AT 94.32 CENTS PER POUND
• Stock Markets Form Fresh All-Time Highs • Incoming Marketing Year Starts Out with a Bang • USDA Lowers U.S. Production Estimate • Tropical Weather Grows More Active
The market continues to push higher on speculative buying and now possibly some upside protection buying by trade shorts as well.
Unfixed on-call sales continued to rise and were at 14.23 million bales last week, or nearly ten million bales higher than unfixed purchases. This continues to add fuel to an already fiery market!
In this month’s 2021/22 U.S. cotton projections, beginning stocks are slightly larger, and a 536,000-bale decrease in production results in lower exports and ending stocks. Beginning stocks are larger as estimated exports for 2020/21 are reduced 50,000 bales based on final Export Sales data and Census Bureau data through June. NASS’s first survey-based estimate of production for 2021/22 is 17.3 million bales.
Market Movement from 02nd Aug 2021 to 07th Aug 2021
• This week was consolidation week for NY future. December NY future steadily rose during the week. Slowly and steadily it crossed and closed above 91 cents. A signal of consolidation.
Cleveland on Cotton: Lagging Exports Not a Sign of Weak Demand
August 6, 2021
The cotton market has now bulled through 90 and 91 cents and set the stage for a challenge of 93 cents. However, that barrier most likely will not fall until the September world supply demand report is released with USDA’s first objective crop estimate. Granted, Mother Nature can continue with her efforts to further trip-up this crop.
The chart still looks constructive and spec longs have no reason to exit positions, while trade shorts are getting a bit more nervous as we head into the peak hurricane season.
Therefore, as long as the outcome of the major Northern Hemisphere crops remains in limbo, the market should remain well supported, with the possibility to spike higher in case something were to go wrong on the weather front.
Market Movement from 26th Jul 2021 to 31st Jul 2021
• Market remained steady during the week but NY December contract first time crossed 91 Cents barrier in intraday trading. Although NY December closed with some minor weekly loss, technically picture looks sound.
• U.S. Export Sales for current year was almost nil. Now only one week remained for current year. Shipment was 2,47,000 Bales.
• Fed Announced Interest Rates Will Remain Unchanged • Sunday, August 1 Marks Start of New Marketing Year • More Rain and Heat Needed • August WASDE on the Horizon
A positive spin on things first. This appears to be shaping up as one of those rare and blessed years where most producers will enjoy both a good crop and a good price. It doesn’t happen often. Prices (new crop Dec futures) have moved to the 87 to 88 cents area 4 times since the beginning of 2021. This most recent move has now carried us to new highs at better than 90 cents.
Cotton prices surged higher on the week climbing to an even 91 cents before succumbing to Friday’s selloff across all markets: financials, commodities, and equities. Weekly export sales were weak, and the outside markets suffered at week’s end. Nevertheless, the market showed strength between 90 and 91 cents as textile mills were forced to come to the board and fix prices.
Speculators continue to throw money at the long side, but scale-up trade selling is keeping the advance in check so far. As long as crops around the globe continue to perform well, it will be difficult to generate much upside momentum.
December cotton flirted and teased 90 cents all week and the nearby October contract did settle above 90 cents. Demand continues to be the big engine pulling prices higher. Mill demand is strong across the board; China, Vietnam (limited Chinese coronavirus issues), Turkey, India, and across Southeast Asia. Consumer demand is especially strong in the big markets of the U.S. and Western Europe, and actually around the world.
Market Movement from 19th Jul 2021 to 24th Jul 2021
• A highly volatile week on NY future. This week started week with 300 points loss and recovered in next 3 days in December contract. NY December posted contract high of 90.57 intraday and closing high of 89.86 on Thursday. With volatility, open interest is rising so speculator again active. NY December closed with small weekly loss of 27 points.
• December Futures Hit Life-of-Contract High at 90.59 cents • Treasury Notes Continue to Weaken • Next Marketing Year Sales Pick Up Steam • 60% of U.S. Crop Now “Good” or “Excellent”
This week has shown that the market has a lot of underlying support, as Monday’s wash-out was met by ready trade buying. The massive amount of unfixed on-call sales, a strong Chinese market, inflation expectations and still uncertain crop outcomes are discouraging potential short selling.
Prices continue to show strength. New crop December futures closed today at 88.16 cents—the highest in a month and topping 88 cents for the third time near the contract high.
Cotton’s path seems on more solid footing in recent weeks. Given the present fundamentals, the market has clearly established a current objective top at near 90 cents. It looks like there’s currently plenty of support at 84.
The U.S. 2021/22 cotton projections show higher production, exports, and ending stocks compared with last month. While the June 30 Acreage report shows 300,000 fewer planted acres for U.S. cotton than NASS’s previous survey, a rainfall-driven reduction in projected Texas abandonment means U.S. harvested area is projected 9 percent higher. While 2021/22 production is 800,000 bales higher, consumption is unchanged, and exports and ending stocks are each projected 400,000 bales higher.
A mighty sledgehammer came down and struck the agricultural markets this week. Cotton, losing nearly 400 points at one time, performed significantly better than the oilseed and grain markets. Cotton reclaimed much of its loss by the week’s end as the new crop December contract returned to mid-85 cent level. Thus, the technical objective of an 88-93 cent trading range is back in vogue.
Production, Consumption and Trade are Expected to Increase in 2021/22
For the current season, the global production estimate for 2020/21 has been reduced to 24.3 million tonnes this month with smaller crop estimates expected for India, Brazil, and the United States. For India, the latest meeting of the Committee on Cotton Production and Consumption (COCPC) reported production for 2020/21 at 6.12 million tonnes. With the country under crisis from a second wave of COVID-19, mill-use has been revised down to 5.15 million tonnes.
Procurement operations of seed cotton (Kapas) under MSP are going on smoothly in the States of Punjab, Haryana, Rajasthan, Madhya Pradesh, Maharashtra, Gujarat, Telangana, Andhra Pradesh, Odisha and Karnataka. Till 23.03.2021 a quantity of 91,86,803 cotton bales valuing Rs.26,719.51 Crore has been procured benefitting 18,86,498 farmers.
All international benchmark prices increased over the past month.
The NY December futures contract climbed from 67 to as high as 72 cents/lb near the end of October. More recently, prices eased back to 70 cents/lb. Cotlook’s A Index rose from 73 to 76 cents/lb over the past month.
Changes in Supply and Demand Estimates (from 17 August 2020)
Limited Cotton Recovery within Pandemic: Production and Stock Levels High, Slow Consumption Growth
Even as the most stringent containment measures begin to be lifted, the opportunity for economic recovery may not relieve current market uncertainty. Countries vary in their ability to flatten the contagion curve and the fiscal space to mitigate the pandemic associated recession.
Movement in benchmark prices was mixed over the past month.
The NY December futures contract moved lower (to below 60 cents/lb in late July) and then higher (near 65 cents/lb in early August) over the past month. Current values (63 cents/lb) are nearly even with those from one month ago.
A cyclonic circulation is over East Uttar Pradesh and adjoining area. Another cyclonic circulation is over Central Pakistan. A trough is extending from central Pakistan to Bangladesh across Rajasthan, South Uttar Pradesh, Jharkhand and West Bengal in lower levels. A cyclonic circulation is over central parts of Assam. A cyclonic circulation is over south Konkan. A shear zone is extending from this cyclonic circulation to Chhattisgarh across North Interior Karnataka and Telangana.
U.S. producers will plant 13 million acres in 2020
U.S. cotton producers intend to plant 13 million cotton acres this spring, down 5.5% from 2019 (based on the U.S. Department of Agriculture’s February 2020 estimate), according to the National Cotton Council’s 39th Annual Early Season Planting Intentions Survey.
Cotton Inc. Executive Cotton Update - February 2020
Executive Cotton Update - February 2020
Macroeconomic Overview: The Bureau of Economic Analysis estimates that the U.S. economy grew 2.3% in 2019. Forecasts suggest that growth could slow a little in 2020, with many projections falling between 1.9% and 2.1%. For comparison, in 2018, growth was 2.9% and in 2017 growth was 2.4%.
Highlights from the Inaugural Session of the 78th Plenary Meeting:
Consumers today are increasingly demanding information on the origin and history of the products they buy, putting pressure on retailers to provide transparency
Multiple technologies have the potential to provide that traceability, including blockchain and a host of products from private companies
Gujarat cotton crop is estimated as 1,06,94,302 Bales out of which 2,75,000 Bales will be of V-797 rest will be Shankar-6. Gujarat cotton crop yield is expected to rise by 32.97% and crop is expected to increase by 30.83%
we estimate total Gujarat cotton pressing to be 120-125 Lakh Bales of 170 Kg.
The Season 2018 -2019 started with bullish sentiment in India. Indian cotton crop was predicted 343 lakh bales at the start of the season against 365 to 375 lakh bales of season 2017-2018. Opening stock was low and mills requirement of new cotton was high. With bull sentiment season touched double top at 47,150 on 15th October at the start of the season.
The latest U.S. Department of Agriculture (USDA) estimates indicate that total U.S. cotton textile and apparel trade rose during the first half of 2019, compared with the corresponding 2018 period. U.S. cotton product imports totaled the equivalent of 9.0 million 480-pound bales of raw cotton during January-June 2019—compared with 8.8 million bales for the first 6 months of 2018—while cotton product exports declined slightly to 1.7 million bale-equivalents.
Cotton Textile exports reached a level of USD 739.17 million in June 2019 marking a decline of (-) 30.4 per cent against the corresponding month of June 2018, wherein exports were valued at USD 1,061.96 million.
In rupee terms, exports during the month of June 2019 reached a level of Rs. 5,132.72 cr. as against Rs. 7,199.39 Cr. in June 2018 marking a decline of (-) 28.7 per cent in rupee terms.
China cotton imports in 2019/20 are expected to surpass the previous year’s robust level, reinforcing its position as the world’s largest importer. The current 2018/19 estimate, boosted this month, is expected to be the largest in 5 years as China supplements domestic supplies amid ongoing auctions of State Reserve stocks. Despite this strong upward trend in imports, U.S. exports to China have weakened as Brazil, Australia, and other countries have expanded both exports and market share.
While corn remains the major safrinha crop for Brazilian farmers, more cotton acreage is being planted in Mato Grosso this spring, as well.
Over the past two years, cotton planting has increased by nearly one-third for the safrinha in Mato Grosso. The Brazilian Association of Cotton Producers(Abrapa) forecast cotton acreage to grow to 1.4 million hectares (3.46 million acres). Mato Grosso accounts for about 88% of Brazil’s cotton production.
Historical Revisions to Indian's Cotton Balance Sheet - USDA
Historical Revisions to Indian's Cotton Balance Sheet - USDA
Historical revisions have been made to India’s balance sheet for the years 2002/03 through 2013/14, with the stock adjustment carried forward. The revisions are based on the conclusion that market yard arrivals data underreported arrivals in the early portion of the harvest season. This conclusion was based on observed market activity in November for several years.
