U.S. cotton production in 2021/22 is projected to rise 2.4 million bales, but total supply is projected at its lowest in 5 years, and both exports and ending stocks are forecast lower than in 2020/21. Production is anticipated at 17.0 million bales, with 12.0 million planted acres as indicated in Prospective Plantings, abandonment projected above the average of the past 5 years, and average yields.
COTTON MARKET MOVES HIGHER AHEAD OF BIG REPORT WEEK
May 09, 2021
The ICE July cotton contract gained 158 points on the week to finish at 89.66 as the July – Dec inversion weakened to 277. The Dec contract gained 183 points for the week, finishing at 86.89. Last weekend, our proprietary model (timely results provided in our complete weekly report) predicted a finish that would be near unchanged to lower Vs the previous Friday’s settlement, which proved to be incorrect.
In recent weeks, the battle between grain and cotton prices resembles that of the race between the tortoise and the hare. Corn and soybeans traveling at warp speed have left cotton in their dust. Such was the case last week with a slow start and December futures rallying late to close at 86.89 for a weekly gain of almost two cents. This is an increase of nearly 15 percent over the past three months for cotton.
Market Movement from 03rd May 2021 to 08th May 2021
• NY Future market remained steady during the week except on Thursday market jumped 300 points for old crop and 150 points for new crop. This has widened old crop vs new crop inverse. This bullish move has resulted due to huge US export shipment numbers, multiple year high prices of corn and soyabean and also short covering due to technical reversal. Ultimately July gained 158 points and December gained 183 points during the week. Now December is inverse 277 points to July.
• Treasury Secretary Comments Whipsawed Markets • Export Sales Report Showed Record Level of Shipments • S. Planting Progressing at Normal Pace • Mixed Weather Outlook for Southwest Region
Market Reclaims High Ground, Fundamentals Remain Bullish
May 7, 2021
As expected, the cotton market reclaimed the high ground this week as Thursday’s close pressured our December futures target of 88 cents. The Thursday settlement was 86.72. Additionally, the old crop July was as back above 90 cents. Both contracts settled the day near their trading highs, a very strong signal for higher prices.
The trade is too short for our taste considering how little cotton is left in the US and how uncertain the new crop outlook still is. With financial markets in a state of ‘irrational exuberance’, speculators are now chasing after commodities and cotton might be next on their list.
COTTON MARKET SUFFERS MODEST WEEKLY SETBACK; IMPORTANT MAY WASDE RELEASE APPROACHES
01-May-2021
The ICE July cotton contract gave back 72 points on the week to finish at 88.08 as the July – Dec inversion weakened to 302. July gained 591 points for the month of April. The Dec contract gained 13 points for the week, finishing at 85.06.
The market (new crop Dec futures) seems to be working its way in to a “comfort zone” of mostly 81 to 87 cents. Ahead of USDA’s May supply/demand numbers on the 12th and the first estimate of actual acres planted next month on June 30th, the market will continue to focus mostly on US crop conditions and weekly exports for direction.
• July Futures Gained 49 Points This Week • Export Commodities Receive More Tailwind • U.S. Export Commitments Still High Despite Recent Slow Sales • Rain Hit Some Parts of Southern High Plains
Market Movement from 26th Apr 2021 to 01st May 2021
• This week NY future market remained highly volatile on weather reports from major cotton growing areas in US. NY July future gained 220 point on Tuesday, lost 190 points on Wednesday and 298 points on Thursday on weak weekly export sales data and again gained 154 points on Friday supported by news of fresh import quota from Chinese government, ultimately NY July future lost 72 points during the week while December future gained 13 points and reduce July-Dec inverse to nearly 300 points.
After rallying nearly 13 cents since the April 5 low, July became quite ‘overbought’ and needed to pull back. The rain in Texas over the last two days has killed upside momentum for now and forced the market to retreat.
COTTON MARKET CONTINUES TO REACH HIGHER; FEW NATURAL OLD CROP SELLERS
April 26, 2021
The ICE July cotton contract gained 377 points on the week to finish at 88.80 as the July – Dec inversion strengthened to 387. The Dec contract gained 240 points for the week. 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.
Trading rather lazily for most of the week, cotton futures exploded for triple digit gains on Friday climbing ever closer to their contract highs of February. July futures closed the week at 88.80 capturing almost three cents, while December settled at 84.93 for a gain of nearly two and a half cents.
Market Movement from 19th Apr 2021 to 24th Apr 2021
• This week US future was dominated by bulls. NY July is now front month as well as last future for old crop. NY July gained 377 points during this week. Cotton was perhaps most supported this week by the continuing rally in grains. Demand for corn, soybeans, wheat, and sorghum from China has support grain markets. Weak USD and still unclear drought condition in Texas gave bulls opportunity to pull market up.
FUTURES TRADE SIDEWAYS, EXPORT SALES HIT SLOW PACE
• Future Market Coverage Switching to July Contract • Jobless Claims at Lowest Level Since Before Pandemic • Export Sales at Slower Pace This Week • Cotton Belt Planting Ahead of Five-year Average
NY futures are currently on hold, waiting to see how much cotton makes it out of the ground over the next 6-7 weeks. If it rains and we get a decent amount of acres planted, then the market will likely back off a little. But if the drought continues and we are suddenly looking at a 13-14 million bale crop only, then watch out!
The ICE July cotton contract gained 129 points on the week to finish at 85.03 as the July – Dec inversion strengthened to 250. The Dec contract finished higher on the week at just north of 82.50. 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. However, we did not recommend trading this bias.
With spring comes a sense of optimism as warmer weather ushers in new growth and opportunities for a fresh start. So, it seems with the cotton market advancing for a second consecutive week despite some rather mixed signals. July, now the front month, closed at 85.03 gaining 129 points on the week and 286 points for the month.
Market Movement from 12th Apr 2021 to 17th Apr 2021
• After weak opening of NY Futures on Monday, NY May future was able to close the week with 131 points gain and July future gained 129 points. Strong dollar put pressure on future market but technical and fundamental both supported uptrend in the market. Some weather report and outside forces weighed on the market. May future is now close to expiry and trade rolled over to July. May-July spread give full carry.
July managed to hold above its long-term uptrend line dating back to April of last year and over the last six sessions it also broke away from its short-term downtrend line that had its origin in late February.
This has switched the signal for speculators back to ‘green’, while trade shorts are now scrambling to fix on-call sales after missing an opportunity to do so several cents below.
From the peak at near 88 cents in late February to the decline to near 76 cents in late March, cotton price (new crop December futures) are trying to mount a comeback. Since the latest low, we’ve had 9 up days out of the last 13 and December now stands at 82 and change.
COTTON MARKET SKID COMES TO AN END; USDA REMAINS BULLISH ON CONSUMPTION0
April 10, 2021
The ICE May cotton contract’s weekly losing streak ended at six with a 445-point gain to finish at 82.40 as the May – July switch weakened slightly to (134). The Dec contract finished notably higher on the week at 81.78. It is interesting to note that the Dec contract has larger open interest that either May or July, which is unusual at this point of the season, but it certainly is telling of where the market’s focus lies.
Posting gains for the first week in over a month and a half, it appears the market finally succumbed to trading fundamentals. Last week it was greeted to bullish numbers in both export sales and USDA’s April S/D report. As a result, May cotton was up 4.45 cents closing Friday at 82.40.
• U.S. Dollar Rally is a Headwind for Cotton • U.S. Export Commitments Reach 16 Million Bales • Bullish WASDE Report Released • Southwest U.S. Hopeful for Rain
The 2020/21 U.S. cotton supply and demand forecasts show higher exports and lower ending stocks relative to last month. Production and domestic mill use are unchanged. The export forecast is raised 250,000 bales, to 15.75 million, based on the pace of recent sales and shipments. Ending stocks are now forecast at 3.9 million bales, equivalent to 22 percent of total disappearance. The marketing year price received by upland cotton producers is projected to average 68 cents per pound, a reduction of 1 cent from last month.
Market Movement from 05th Apr 2021 to 10th Apr 2021
• This week was double bonanza for Bulls. Decent export sales and Bullish WASDE has given full supports to Bull and NY May future gained 445 points W/W. May option is near to expire so roll over to July will starts from next week.
Big Report from USDA–USDA gave the cotton market a small gift with its April supply demand report. Estimates included higher consumption and lower carryover of U.S. stocks. Estimated world consumption was increased, world production was lowered, and world carryover was lowered.
The market has been in a battle between bearish technicals and bullish fundamentals, and today’s bounce above key resistance points has given the bulls hope that the market has finally bottomed.
COTTON MARKET SUFFERS YET ANOTHER WEEKLY LOSS, NO SURPRISE IN USDA ACREAGE REPORT
03-April-2021
The ICE May cotton contract has suffered six consecutive weekly setbacks, most recently for a 243-point loss to finish at 77.95 as the May – July switch weakened to (132). The May contract gave up 795 points for the month of Mar. The Dec contract also finished lower on the week at 77.91, although it did manage to trade above 80.00 following the release of the Planting Intentions report.
Never has a short trading week been more welcomed. Like an April Fools prank gone bad, the market seesawed its way to another losing week, the fifth consecutive week.
As before, the front month took the brunt of it with May giving up nearly two and half cents on the week while finding itself 17 cents below its high of five weeks ago. December futures lost less than a cent on the week but has fallen 11 cents over the five-week period.
Technicals Not Friendly, Fundamentals Remain Positive
April 5, 2021
Baby and her new blue jeans had a rough ride last week as cotton stumbled badly on the week’s last trading day, giving up all its weekly gains and a bit more. The resulting three-day weekend had traders talking gloom and doom and all wondering how the market was so blindsided.
• Daily Average Trading Volume Hit Several Week High • Outside Markets React to European COVID lockdowns and Biden Infrastructure Plans • Export Sales a Bust This Week • Prospective Plantings Results Released
Market Movement from 29th Mar 2021 to 03rd Apr 2021
• Week started with minor green and stayed green till Wednesday. On Thursday after disappointing export sales report NY May sharply declined and closed 243 points in red. Technically market has lost upside momentum. Lockdown in Europe, strong dollar, export sales cancellation from China and Indonesia were main reasons for the sharp decline.
Ho-Hum Export Report and Unsettled Planting Intentions
April 2, 2021
The hopeful return to the upper 80’s has stalled. The market (new crop Dec futures) was in a downtrend for the month of March and April isn’t starting out any better.
There’s no reason to panic– we very well yet could still see a return to higher prices. But amid all the previous optimism and hype, the market now shows it has no problem moving in the opposite direction instead.
The chart and price action still look weak and with program trading making a lot of the decisions these days, we might see further weakness in the front month.
The question is whether current crop will continue to drag the board lower on technical weakness or whether December will eventually step into the leadership role and pull the market out of its hole on constructive fundamentals?
The ICE May cotton contract suffered its fifth consecutive weekly setback, this time for a 430-point loss to finish at 80.38, with the May – July switch effectively unchanged at (103). The May contract has now given up 1010 points over the last 4 weeks and has traded around 1800 points off its Feb (and contract) high. The Dec contract finished significantly lower on the week at 78.74.
Market Movement from 22nd Mar 2021 to 27th Mar 2021
• A week of blood bath under total control of bears on cotton future markets. Particularly limit down on Thursday despite better US export sales report. Several reasons potentially combined to account for Thursday’s bearish implosion. Those include a stronger dollar, a weak looking chart, fear of Chinese retaliation over the banned Xinjian cotton, end-of-the-month adjustments, and a rise in global COVID-19 infections.
If cotton prices were an acorn, we know how Chicken Little felt when he thought the sky was falling. The cotton market has created quite a stir with four consecutive weeks of losses and falling into the seventies for the first time since last October. Closing limit down on Thursday after a respectable export sales report certainly heightened the anxiety.
The economic and market fundamentals have not changed all that much, if any. Yet, cotton is now struggling to somehow maneuver its way back to 80 cents.
“Baby’s Got Her Blue Jeans On.” It’s a brand-new pair, the old ones completely wore out. This new pair appears to be made of high strength cotton and ready for a good bull ride—back to the mid to upper 80’s before Mother Nature takes control of price activity.
• Prices Fell All Five Sessions Since Last Thursday • Chinese Stocks Suffer from Increased Tensions with U.S. • Strong Export Sales and Shipments This Week • Prospective Plantings Report Next Week
Technically the price action looks awful, since today’s limit down pierced through the long-term uptrend line dating back to April 2020. Volume was heavy as specs were stopped out of long positions and new shorts probably entered on negative momentum.
Based on how weak the market went out today we have to anticipate further losses and at this point it is still anyone’s guess as to where this falling knife is finally going to stick.
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.
COTTON MARKET SUFFERS FOURTH CONSECUTIVE WEEKLY SETBACK, ANNUAL PLANTING INTENTIONS REPORT & INDEX FUND ROLLING LOOM
March 20, 2021
The ICE May cotton contract has suffered its fourth consecutive weekly setback, this time for a significant 288-point loss to finish at 84.68 as the May – July switch weakened slightly to (104). The May contract has now given up 580 points over the last 4 weeks. The Dec contract finished significantly lower on the week at 82.51.
Market Movement from 15th Mar 2021 to 20th Mar 2021
• This week was dominated by bears. Except Tuesday all four sessions of NY May future closed in red. Unpleasant U.S. China trade talk at Alaska put some negative impact on all commodities. So, despite decent export sales report NY May closed at 84.68 cents per pound with weekly loss of 288 points.
WEEK BRINGS POSITIVE ECONOMIC OUTLOOK AND SIDEWAYS TRADING
• Federal Reserve Announces Positive Economic Outlook • U.S. Export Sales Bright Spot for Traders • Warm and Dry Planting Season Ahead • Export Sales Report Coming Thursday
Sometimes one should take a few days off to figure out what is happening. It seems I have not been able to gage the cotton market as I would like. Obviously, my screen is fuzzy! I have tried all week to reboot, and I keep coming up bullish the market.
The CFTC spec/hedge report showed that speculators lightened up on their position during the recent selloff, but they still held a 7.10 million bales net long, while index funds carried a 7.72 million bales net long position. Considering the low trading volume and the relatively small change in open interest, we don’t think that these positions have materially changed since the last report.
To the casual observer, last week’s trading appeared rather boring with May closing at 87.56 and December at 84.20, 30 points or so within where they started. However, nothing could have been further from the truth as volatility continues to reign supreme.
Market Movement from 08th Mar 2021 to 13th Mar 2021
• This week was highly volatile week on future markets. Tuesday NY futures were limit down on heavy technical selling, May future closed at 84.32, looked like technical selling will continue with damaged charts but market recovered from next day. With the help of improved export sales and good shipment report market gained almost entire loss and closed the week nearly unchanged.
• USDA release WASDE report for March which was neutral to friendly.
FUTURES WHIPSAW TRADERS AS TRADING VOLUMES REMAIN HEAVY
• Passage of American Rescue Plan Act Cheers Markets • WASDE Report Recap • Healthy Export Sales Report Released This Week • Upcoming Weather Focus for Traders
We are a day early this week, but it feels much better to comment on a day of triple digit price gains as opposed to defending the case for a robust market with prices falling as in the past two weeks. To paraphrase the expression of others: Cotton is Back. Certainly, the bulls call for dollar has now beat back two significant challenges and again presented its case to return to the mid 90’s and …well we will just see if there is breathable air up there.
This month’s 2020/21 U.S. cotton forecasts show lower production, consumption, and ending stocks relative to last month. Production is reduced 250,000 bales to 14.7 million, based on the March 9 Cotton Ginnings report. The final estimates for this season’s U.S. area, yield, and production will be published in the May 2021 Crop Production report. Consumption is reduced 100,000 bales due to the industry’s lagging recovery from the previous year’s sharp losses.
COTTON MARKET FINISHES LOWER FOR SECOND CONSECUTIVE WEEK; WASDE RELEASE ON TUESDAY
March 07, 2021
The ICE May cotton contract has suffered its second consecutive weekly setback, this time for 107 points to finish at 87.76 as the May – July switch weakened slightly to (91). The Dec contract finished at 84.54, just south of the pivotal 85.00 mark.
Market Movement from 01st Mar 2021 to 06th Mar 2021
• Another bear dominated week on NY future market. After last week’s liquidation, market recovered a bit on Monday but recovery did not sustain and the week ended in red.
• NY May lost 107 points and NY July lost 104 points during this week.
The cotton market was under pressure all week but worked through tripled digits on most days. However, in terms of prices the bears were the decided victor as prices slipped to almost the 87-88 level, basis May and to 84-85 cents, basis the new crop December contract. Yet, the weekly settlement proved cotton to be a strong market finisher.
A look at the candlestick chart shows that sellers have taken control of the market, with five out of the last six sessions being ‘black candles’. However, this is still very much a correction in a bull market and until the primary uptrend line, which currently runs through 79 cents, is broken, it would be premature to give up the uptrend.
• Volumes Surge as Prices Whipsaw Traders • Rising Interest Rates Strengthen U.S. Dollar Position • Accumulated Exports at 8.56 Million Bales • March WASDE Release Next Week
Market Movement from 22nd Feb 2021 to 27th Feb 2021
After 9 consecutive green close NY futures closed limit down on Thursday. Before that NY May climbed its new two and half year high to 95.60 on Thursday and return back to limit down so Thursday NY May closed down 591 points from its day’s high. After gaining nearly 500 points from last week NY May closed in red and lost 165 points W/W. There was no big reason for trend reversal but correction was due in over bought market condition.
• May Futures Set New Life-of-Contract Highs Every Day This Week • China Largest Purchaser of U.S. Upland Cotton • Good Economic News and Lower Bond Prices • Merchants Watching Futures Market for Directional Cues
Demand Key to 2021 Prices, Income, Risk Management
February 26, 2021
Prices have continued to show upward strength, although down sharply today—putting a halt to 9 consecutively higher days. Cotton futures were down 300 to 400 points today with old crop May at 89.69 and new crop Dec at 84.78.
It finally happened. After some 14 days of higher highs cotton prices finally bit the dust. The song at week’s end was: “You Picked A Fine Time to Leave Me Lucille.” Yet, the crop is not in the field. There is scant little old crop in grower hands and the new crop is still in the seed bag.
Today’s price action was outright ugly and we should see some follow through to the downside on Friday. How far down remains to be seen, but unless we get a bounce tomorrow, the weekly chart will paint a bearish ‘shooting star’, which will invite more selling.
COTTON MARKET CONTINUES HIGHER, USDA FORECASTS ACREAGE NEAR UNCHANGED IN 2021
February 21, 2021
The ICE May cotton contract gained 261 points for the week ending Feb 19, finishing at 90.48; the May – July switch was little changed at (73). Dec again finished near its weekly high, this time at 85.50. Last weekend, our proprietary model (timely results provided in our complete weekly report) predicted a finish that would be near unchanged to lower Vs the previous Friday’s settlement, which proved to be incorrect.
Market Movement from 15th Feb 2021 to 20th Feb 2021
• This week started with Bullish mood and all four sessions ended in green. NY March future on notice and trade moved over to May future. NY March gained 168 points while NY May finished this week with 182 points weekly gain.
• May Futures Mark High at 90.77 • Jobless Claims Increase • China This Week’s Top Buyer of U.S. Cotton • USDA Holds Virtual World Agricultural Outlook Conference
The March liquidation was orderly, as the trade kicked the can down the road, hoping for an eventual break to cover its short. Sure, there are still four months for the trade to deal with its position, but what worries us is that it keeps getting bigger, as ‘cheap’ basis offers lure more shorts into the market.
Cotton prices have settled higher in at least one contract month for the past 11 days. Chinese prices have hit a 30-month high. That is just too much, but then the market is not actually trading cotton.
Trade shorts are feeling the heat and at the moment we see no easy way out for them. What worries us is that traders are still stubbornly hanging on to their positions, as futures open interest has barely budged over the last five sessions, dropping only slightly from 248.1k to 247.3k contracts. This is quite remarkable considering that we are in the midst of a front month liquidation.
COTTON MARKET POSTS ANOTHER BANNER WEEK, PRODUCERS SELLING 2021 CROP
February 14, 2021
The ICE May cotton contract gained 464 points for the week ending Feb 12, finishing at 88.96 as the May – July switch strengthened to (75). Dec finished near its weekly high at 83.89. Again, time to consider pricing new crop bales. 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.
Market Movement from 08th Feb 2021 to 13th Feb 2021
• NY Future market remined highly volatile during this week in favor of bulls with triple digit gain on Monday, Tuesday and Thursday and triple digit loss on Wednesday. Over all NY March gained 453 points and NY May gained 464 points during the week.
Cotton prices have been highly variable (wild) over the past week or more with triple digit moves up and down for 6 consecutive days Feb 4-11. Typically, this can be a sign of market surprises (good or bad) and/or nervousness.
The 2020/21 U.S. cotton supply and demand forecasts show slightly higher exports and lower ending stocks relative to last month. Production and domestic mill use are unchanged. The export forecast is raised 250,000 bales to 15.5 million based on a strong pace of shipments to date. Ending stocks are now estimated at 4.3 million bales, equivalent to 24 percent of total disappearance. The upland cotton marketing year average price received by producers is projected at 68 cents per pound, unchanged from January.
This market is crazy unpredictable and unknown… but so far, in a good way. The multitude of factors impacting price are as complex as I’ve experienced in over 30 years dealing with cotton. This includes:
• Expected demand growth (rebound) after stunning weakness.
• Demand growth is expected due to anticipated improvement in the COVID pandemic situation.
COTTON MARKET FINISHES WEEK SIGNIFICANTLY HIGHER, CAN BULLISH RUN CONTINUE?
February 06, 2021
The ICE Mar cotton contract gained 210 points for the week ending Feb 5, finishing at 82.74 as the Mar – May switch weakened to (128). The Mar contract managed to trade a high of 84.89 on the week. Last weekend, our proprietary model (timely results provided in our complete weekly report) predicted a finish that would be near unchanged to lower Vs the previous Friday’s settlement, which proved to be incorrect.
Market Movement from 01st Feb 2021 to 06th Feb 2021
• Before US Export Sales report on Thursday NY futures traded in small range during the week. After release of US export on Thursday market jumped up and registered new contract high of 80.84 and closed at 84.28 with 329 points gain. With profit taking on Friday market gave up half of Thursdays gain but still NY March future gained of 210 point during the week.
It should not go unnoticed that we have often commented that traders should watch the Chinese market as New York has a long tendency to follow Chinese prices. That trend has not been as strong the past few years, but never doubt it. There are solid reasons.
MARKETS TRADE SIDEWAYS, ECONOMIC NEWS BETTER THAN EXPECTED
• Thursday’s Trading Volume Hits Highest Single Day Volume in 18 Months • Inflation Expectations Rising, Positive for Commodities • Long-term Weather Outlook Remains Negative • Major Reports Releasing Next Week
Although today’s breakout was impressive, we don’t think that it was the beginning of a big short squeeze yet. As described above, it was caused by a confluence of circumstances in a lack of sell-side liquidity. That will change tomorrow, when the GSCI roll begins, during which index funds and speculators move remaining longs from March into May.
COTTON MARKET FINISHES WEEK LOWER AMID FUND ROLLING, BIDEN LOOKS TO DIVERT CCC FUNDS FOR CLIMATE CHANGE
February 01, 2021
The ICE Mar cotton contract gave up 92 points for the week ending Jan 29, finishing at 80.64 as the Mar – May switch weakened to (120). The Mar contract gained 252 points for Jan. 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 incorrect.
Market Movement from 25th Jan 2021 to 30th Jan 2021
• Cotton futures had its worst week in quite a while. March futures prices fell four out of five trading sessions from the high on last Friday at 81.56 cents per pound to Thursday’s low at 79.85 cents per pound. Some recovery was seen on Friday and closed the week at 80.64 cents per pound with 92 points weekly loss.
• Outlook for Economic Recovery Dims • Long-Term Forecast Features Early Spring and Better Rainfall • Total Export Market Commitments at 13.1 Million Bales • Traders Focus on Managing Hedge Books
Cotton muddled through the week seeing nothing but red until the bears waved a white flag on Friday and allowed cotton prices to ease back to their support at 80-81 cents, basis old crop and 77 cents, basis new crop. Thus, the market survived an attempt by bears to run prices lower.
The lack of spec buying over the last couple of weeks has allowed the market to drift back into its long-term trend channel. However, this bull market still has a lot of leeway before it needs to worry, with the 50-day MA sitting at 76.46 and the long-term uptrend line currently running through around 75 cents. The 200-day MA at 67.03 is still a few more levels below that.
Market Movement from 18th Jan 2021 to 23th Jan 2021
• This week started with bullish trend due to weaker U.S. dollar. With new uptrend NY March crossed contract high of 83 cents. On Friday market lost around one cent with selloff in grain markets. ICE March future closed at 81.56 cent with 86 points weekly gain.
• Again U.S. Export Sales was decent above 3 lakh bales. Despite cancellation of 31,000 bales from China demand accrued from other destinations. Shipment also was good with China leading.
COTTON MARKET FINISHES WEEK HIGHER BUT HINDERED BY WEAKNESS IN COMPETING CROPS
January 24, 2021
The ICE Mar cotton contract gained 86 points for the week ending Jan 22, finishing at 81.56 as the Mar – May switch weakened to (110). It is worth noting that the Mar contract managed to breach the 83.00 level on the week, marking the market’s highest nearby intraday high in more than two years.
• March Futures Gain 142 Points for Week • Stocks End Week With New Record Highs • Analysts Cut Planted Acreage Forecasts for Next Year • Demand for U.S. Cotton Remains Strong
Despite faltering prices at week’s end cotton enjoyed a very positive week as prices increased and exports sales continued robust. Cotton established life of contract highs across the board. New York noted the stronger Chinese market and followed suit. Further, the On-Call sales report, particularly for the May contract, lent a hint of support to higher prices.
As long as China continues to absorb cotton and yarn at the current pace and financial markets remain in a euphoric state, it is difficult to foresee an end to the current bull run.
To the contrary, we still feel that the trade is dangerously exposed with its large net short position, from which it sooner or later needs to escape. Speculators have no intention of quitting their longs at this point, especially since they see a big roll gain ahead if they take their position into the
COTTON MARKET CONTINUES IT’S TREK HIGHER; USDA SLASHES DOMESTIC PRODUCTION AND CARRYOUT ESTIMATES
January 16, 2021
The ICE Mar cotton contract gained 93 points for the week ending Jan 15, finishing at 80.70 as the Mar – May switch weakened to (92), still short of full carry. It is worth noting that the Mar contract managed to breach the 82.00 level on the week.
Market Movement from 11th Jan 2021 to 16th Jan 2021
• This week was volatile week with help of bullish WASDE report. USDA reduced US Crop by one million bales and increased US export target by 2.5 Lakh Bales in January WASDE report. Which leaves U.S. ending stock at manageable number now. Also, world’s consumption increased in this WASDE and ending stock now remains at 96.32 million bales.
EXCITING WEEK OF MARKETS, COTTON FUTURES SETTLE UP 139 POINTS
• World and Economic Events Befuddle Investors • January WASDE Reported Mostly Minor Revisions • USDA Cut 2020/2021 Crop Production Estimate by 996,000 Bales • Strong Export Sales Return This Week
Headed into the U.S. three-day holiday weekend cotton prices are stuck in mud, but good mud. That is, if you must be stuck it is good to be mired in 81 cent muck as opposed to 60 cent muck. USDA’s January supply demand report validated the market’s run above 80 cents and made a case for prices to trade higher.
Old crop March futures pushed above 81 cents this week. New crop December has topped 77 cents. Old crop was down a little today to close out the week but cotton enjoyed another good week due to several positive reports released.
From a technical point of view the primary uptrend is alive and well, but the market has recently accelerated out of its trend channel that has been in force since early April. It would therefore not surprise us if the market were to pull back into this channel over the coming weeks, to somewhere in the high 70s.
The U.S. 2020/21 cotton outlook shows higher exports, and lower production and ending stocks this month. Production is lowered nearly 1 million bales to 15.0 million, led by a 500,000-bale decline in Texas. U.S. mill use is reduced 100,000 bales, but exports are raised 250,000 bales as rebounding world demand helps sustain a strong export pace. With lower production and higher demand, 2020/21 U.S. ending stocks are 1.1 million bales lower relative to last month, at 4.6 million bales or 26 percent of use.
The ICE Mar cotton contract gained 165 points for the week ending Jan 8, finishing at 79.77 as the Mar – May switch weakened to (78), still well short of full carry. It is worth noting that the Mar contract spent significant time north of the 80-level for the week.
The New Year always begins with our listing of Bullish and Bearish market factors. These factors that will likely lead market direction over the course of the year.
Market Movement from 04th Jan 2021 to 09th Jan 2021
• Cotton future market started 2021 with a bang. March futures opened the holiday-shortened trading week slightly up at 78.25 cents per pound and surged to a fresh two year high of 80.93 cents on Wednesday. In fact, the open also served as the low for this week’s trading. March futures settled at 79.77, up 165 points for the week.
• 2020 is now in the rear view mirror. We gladly say good riddance as 2020 was not a good year for many and for many reasons. 2021 brings hope of better future.
2020 is now in the rear view mirror. We gladly say good riddance as 2020 was not a good year for many and for many reasons. 2021 brings hope of better outcomes.
Old-crop March futures has now reached the 80-cent area. The recovery in prices since the lows in late March-early April has been phenomenal and much welcomed—continuing to provide growers with marketing opportunities earlier thought not likely.
• March Futures Hit Two-Year High • Commodity Indexes Rally Back to Pre-pandemic Levels • Exports Up Compared to Same Time Last Year • Cotton Grower Magazine Releases Acreage Survey Results for Next Year
Short sellers are becoming an endangered species in the financial markets, as they are afraid of getting steamrolled by the trillions of dollars that central bankers have created out of thin air and all the liquidity that is coming out of bonds, where $18 trillion are trading at a negative yield. This is allowing the financial mania to power ahead without much opposition.
COTTON MARKET CONTINUES TO PUSH HIGHER, HAS OUTSTANDING HOLIDAY SEASON
January 04, 2021
The ICE Mar cotton contract gained 192 points for the week ending Dec 31, finishing at 78.12 as the Mar – May switch strengthened to (58), well short of full carry. The spot month gained nearly 1100 points in 2020 and almost 2000 Vs the market’s 2020 low and gained nearly 600 points in Dec.
1. US SOYBEAN PRICES SOAR AND STOCK LEVELS SHRINK; HOW WILL COTTON ACREAGE HOLD UP?
2. XINJIANG SLAVE LABOR FACTORIES IDENTIFIED IN ALL MAJOR COTTON AREAS SHOCKING GROWTH IN FACTORIES CONTINUED IN 2020 EU TURNS THE OTHER CHEEK AND APPROVES INVESTMENT TREATY
3. CHINA-MADE, SIX-ROW ROUND BALE COTTON PICKERS UNVEILED IN XINJIANG
4. THE RISE OF CHINA’S DOMESTIC APPAREL MARKET; 12 CITIES NAMED IN VOGUE 2020 INDEX CHINA CITIES RISE IN IMPORTANCE TO REPLACE TROUBLED US METRO CENTERS
5. US FASHION CAPITAL DESCENDS INTO CHAOS AS YEAR ENDS
Market Movement from 28th Dec 2020 to 02nd Jan 2021
• Overall, this week was green week on NY Future. ICE Mar Future closed with 192 points gain and May future also gained 184 points during the week. And finally, at the end of the month Mar Future closed with 597 points gain and also May Future closed with 565 points gain monthly.
• With Decent U.S. Export Sales of last 3 weeks. Last week sales were slightly lower but good enough to cross USDA export target. Shipment also running with good pace.
Cotton futures ended the year with a bang, gaining 192 points from last Thursday’s close to settle at 78.12 cents per pound today. In fact, the high for the last day of 2020 is the highest price to print since April of 2019, about 20 months ago. In the spirit of looking back at where we’ve been and since this is the last cotton market weekly for 2020, we thought an annual review and longer-term perspective could be helpful. What follows below is a brief look at the cotton market over the past year.
The market ended the year on a high note, with March closing at a new contract high. We started the year with the spot month at 69.05 cents, then fell to a pandemic reaction low of 48.35 cents, before steadily climbing 30 cents since the beginning of April.
Market Movement from 21st Dec 2020 to 26th Dec 2020
• Due Christmas holidays, this week was short in terms of trading days. Market crashed on Monday due to lockdown news and more spread of Covid-19 cases in Europe and also increasing numbers in USA in line with other markets. But finally recovered majority of the loss and closed the week with 96 points loss.
Undeterred by an economy which seems to be hitting the brakes, the cotton market is plowing through resistance levels at a breakneck speed. Closing Friday at 77.16, it gained over three cents on the week, nearly six cents for the month, and up an astonishing 30 cents since the rally began in April.
COTTON MARKET HAS ANOTHER BANNER WEEK, ANNUAL INDEX FIND REBALANCING AHEAD
December 19, 2020
ICE cotton had another banner week. The Mar contract gained 308 points for the week ending Dec 18, finishing at 77.16 while the Mar – May switch strengthened to a level well-short of full carry, (67). 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.
Market Movement from 14th Dec 2020 to 19th Dec 2020
• Cotton market was on bullish mood throughout the week. Bullish WASDE, excellent US export sales, weaker dollar and hope of economic recovery after start of Covid-19 vaccination program, all bullish factors created stage for uptrend in cotton market. NY March closed over 77 cents gaining 308 points during the week.
Wow, where is the market going? Cotton just does not want to quit. It’s finally a good day to be a cotton grower.
Saddled by what USDA told us were abnormally high world and U.S. stocks, questionable demand, and a lackluster world economy, the cotton market was doomed to die on the vine somewhere between 67 and 74 cents. Forget that. Prices just keep climbing.
The US balance sheet is starting to get tight, which makes it increasingly dangerous for the shorts to fight this bullish trend. Between export sales and domestic mill use we now have commitments of around 14 million bales, against a crop size of 15.9 million bales.
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.
ICE COTTON FINISHES HIGHER ON WASDE WEEK; S&D BALANCE SHEETS STILL FAR FROM BULLISH
December 13, 2020
The ICE Mar cotton contract gained 251 points for the week ending Dec 11, finishing at 74.08 as the Mar – May switch strengthened a bit to (81). 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.
Market Movement from 07th Dec 2020 to 12th Dec 2020
• This week was Bull dominated week. Market crossed 72 cents level at the start of the week and on Thursday there was double bonanza for bulls. Fantastic export sales and Bullish WASDE attracted new spec buying. Market has opened new range by crossing 74 cents mark for NY March future. NY March future closed with 251 points weekly gain. Technically it has crossed all resistance levels and set for higher range.
Although today’s WASDE was for the most part ‘discounted’ by the market, it has shied away any potential sellers and set the market up for another leg to the upside.
The next up move could be triggered by an impending breakout on the weekly chart, which still needs to be confirmed tomorrow. But if the market closes firm, we are likely going to see some new spec longs enter next week.
This month’s outlook for U.S. cotton includes lower production, higher exports, and lower ending stocks. Production is lowered 1.1 million bales, mainly due to a 900,000- bale reduction in Texas. Domestic mill use is unchanged, but exports are raised 400,000 bales to 15.0 million as world consumption and U.S. export sales rise. Ending stocks are 1.5 million bales lower, at 5.7 million or 33 percent of use. This stocks-to-use ratio would be 8 percentage points lower than in 2019/20, and the second highest since 2007/08.
Market Pulled Between Good And Bad News December 7, 2020
As a writer, I firmly believe words are meaningful. Last week’s market review is testament to this. The mere mention of 80-cent cotton drew tremendous response from readers. Not to throw cold water on this excitement, but the anticipated follow-through from the previous week’s outstanding export sales didn’t happen.
Rather than challenge resistance at 74 cents, the market chose to hug its support closing at 71.57, down a cent and a half on the week.
COTTON MARKET FINISHES FIRST WEEK OF DECEMBER LOWER DESPITE MULTIPLE SUPPORTIVE FACTORTS
December 06, 2020
The ICE Mar cotton contract gave up 167 points for the week ending Dec 4, finishing at 71.57 as the Mar – May switch weakened slightly to (88). 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 incorrect. Still, we did not recommend trading the model’s bias for the week.
Market Movement from 30th Nov 2020 to 05th Dec 2020
• This week was bear dominating week. NY March continuously closed in red for four day and on Friday closed in green but ultimately week closed with 167 points loss. Some profit booking and some harvest pressure put pressure on NY futures. Despite robust export sales and weaker dollar market closed in red.
COTTON FUTURES LOSE GROUND, HARVEST AHEAD OF AVERAGE PACE
• $900 Billion Stimulus Plan Presented • No Slow in Exports during Thanksgiving • 84% of Cotton Belt Harvested • Crop Production and WASDE Reports Next Week
As has been long expected, the cotton market continues to work the 70- to 74-cent level, with most of the trading activity between 71 and 73 cents. December futures, with just two trading sessions remaining before expiry, slipped below 70 cents this week, suggesting the March could easily face the same fate.
The failed breakout attempt of last week has shown that the market is not quite ready to move higher, since there is plenty of supply in the pipeline at this point.
However, there are also a number of supporting factors, such as a weaker dollar, lofty Chinese prices, strong soybeans and committed spec longs, which should countervail supply pressures.
Nearby March futures made it a see-saw ride last week and we began this week on a down note. After hitting the 74+cent level on Monday, prices moved sluggishly during the Holiday-shortened week but were then aided by a good export report on Friday.
March closed at 73.24 cents on Friday — up 88 points for the day which helped end the week on a positive note—up 28 points for the week. The see-saw continues as March closes down 109 points at 72.15 today.
Given it was a holiday week with traders’ minds likely elsewhere, there was little in the way of market expectations. Surprisingly, however, significant price swings occurred each day, with March posting a slight gain for the week closing at 73.36.
The ICE Mar cotton contract picked up 28 points for the week ending Nov 27, finishing at 73.24 as the Mar – May switch strengthened slightly to (82). 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.
Market Movement from 23rd Nov 2020 to 28th Nov 2020
• On Monday market started this week with bullish trend with news of success of more COVID-19 vaccine but after that market remained stable during the week. Before Thanksgiving holiday market saw huge volatility but on Friday ICE March future was able to close the week with 28 points weekly gain.
• U.S. Export Sales was bullish with lower prices Vietnam (169,500 bales) and Bangladesh (89,400 bales) were major buyers.
RELATIVELY LIGHT TRADING VOLUME IN HOLIDAY-SHORTENED WEEK
• Continuing Surge of COVID-19 Infections • Dow Jones Industrial Average Made a New All-Time High • Demand Strong in Export Sales Report • Texas Harvest Pace Ahead of 5-Year Average
The ICE Mar cotton contract gained 256 points for the week ending Nov 20, finishing at 72.96 as the Mar – May switch strengthened to (86), which is shy of full carry. 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.
Market Movements Under The Direction Of News Events
November 22, 2020
Both December and March futures opened and closed last week on a positive note. Triple-digit gains on Monday were in response to another promising Covid vaccine trial, while Friday’s similar advance was fueled by a host of favorable technical indicators.
For the week, December rallied almost 2.5 cents. March, now our focus, also picked up 2.5 cents to close at 72.96.
Market Movement from 16th Nov 2020 to 21st Nov 2020
• NY December future is now on notice day so most of the trade rolled over to March. NY March is now lead month. Spread was attractive so roll over was easy. NY December gained 242 points while March gained 256 points during the week. This Bullish trend was due to some positive news of corona vaccine. Also, technically market was able to stay above trend line.
Pricing opportunities have now moved to basis the March futures. So, you may notice the futures look to be a bit higher. That’s due to the “spread” between Dec and March. At present, March is about 2.3 cents higher than expiring December.
Also, the basis has improved somewhat from where we were about a month ago. According to USDA-AMS, the basis quoted is currently -225 points for 31-3/34 and even the March futures for 31-3/35. This is about 50 points better than a month ago.
Cotton survived Friday the 13th trading and spent most of the week in the 69-70 cent trading range in very static trading, almost fearful to trade in any direction.
Yet, the market reversed itself going into the weekly close and prices climbed above 71 cents, only to close just below that mark. The idea of a somewhat friendlier Chinese market sat heavy over the ICE contract all day and was the primary reason for the New York contract to instantly move higher at the close.
The December liquidation failed to move the market despite the certified stock growing to 123k bales. With just 8.4k contracts remaining open before today’s session, December is now for all practical purposes history and whatever happens in the notice period is at best of some psychological value.
Market Movement from 9th Nov 2020 to 14th Nov 2020
• Monday afternoon USDA issued its crop progress report and Tuesday USDA update its supply-demand estimates and also in these added Pfizer Inc said that its experimental Covid-19 vaccine was more than 90% effective. So, this week market started with uptrend move on Monday but could not hold the gain during the week.
• NY Dec future contract gained 138 points on Monday and after that continuously lost. At the end of the week NY Dec future lost 16 points W/W.
Friday the 13th. Cotton is going to be a tough sell in 2021-22 and I desperately hate to write that, much less even think it. Again, I find myself wishing and hoping my analysis will be on the wrong side of history.
The roll period is behind us and tomorrow December options will expire. This has provided the market with a sea of liquidity and allowed traders to sort out their positions.
Interestingly, while Dec open interest has dropped from 103k to 55k over the last five sessions (not including what happened today), overall open interest has only lost about 6k so far and was still at 237k as of this morning.
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.
Tuesday’s USDA crop production and supply/demand estimates were not what was expected. The market moved down for the day but, frankly, we can take relief that price did not decline even more than it did. We’ll have to wait and see what “follow through” action takes place Wednesday.
This month’s 2020/21 U.S. cotton estimates are virtually unchanged from October. The U.S. production forecast is marginally higher, at 17.1 million bales, while domestic mill use and exports are unchanged. U.S. ending stocks remain at 7.2 million bales and, at 42 percent of use, would be the highest stocks-to-use ratio since 2007/08.
After the previous week’s significant selloff, we were hoping last week’s activity would confirm this was only a needed correction in an overbought market. Early on, this appeared to be the case, with the market retracing nearly 50% of those losses. That was quite an accomplishment, considering all the outside noise, including a hotly contested presidential election, a rise in Covid cases and a host of other uncertainties.
EARLY WEEK COTTON MARKET GAINS EVAPORATE ON WEAKNESS IN US EXPORT SALES, ELECTION RESULTS, FUND ROLLING
November 07, 2020
The ICE Dec cotton contract gave up 30 points for the week ending Nov 6, finishing at 68.62 as the Dec – Mar switch weakened to (153), which is approaching full carry. Last weekend, our proprietary model (timely results provided in our complete weekly report) predicted a finish that would be near unchanged to lower Vs the previous Friday’s settlement, which proved to be correct.
Market Movement from 02nd Nov 2020 to 07th Nov 2020
• NY futures gained gradually during the week but gave up all gains on Friday. Finally NY December lost 30 points during the week. Uncertainty of US election results, increasing Covid-19 cases and lockdown in Europe has put pressure on equity and commodity markets. NY December future is near to notice day so main funds roll over their position to March. Spread between December/March is attractive.
After making a long upward run and recently peaking at over 72 cents—the highest price in 9 months (since January), the market (Dec futures) declined and tested support at 68. Prices thus far this week have gained back to the 70 cent area.
After the peak at roughly 72, the often-voiced reasons for the decline or “correction” were “profit taking”, “technical considerations”, and jitters over the decline in the stock market.
Cotton futures continued their second week of back-and-fill action as prices remained entrenched within the well-defined trading channel and holding within the narrow five-cent, 67.50-72.50 cent trading range.
However, now that peak harvest has passed, the market adage, “Short crop have long tails,” continues to live within the trading ring. The trading range should hold as the market moves into next week’s (November 10) USDA world supply demand report.
The recent correction has alleviated ‘overbought’ conditions and the fact the we held above critical support will probably keep most speculators on board as we head into the roll period and it may even bring in some new buying.
The trade finally got the price break it was hoping for, which allowed it to reduce its December exposure to a more manageable level. The upcoming roll period should provide the trade with the necessary liquidity to square away most of the remaining Dec positions.
Managing Risk Is The Key, And We Have Plenty To Go Around
November 1, 2020
The ghosts and goblins of Halloween came early last week. In just a week’s time we experienced:
• A hard freeze in the Southwest. • Another hurricane in the Southeast. • An uptick in Covid cases around the globe, and a stock market decline the likes of which not seen since last March. • Along with the same Presidential campaign noise we’ve been experiencing the past several months.
COTTON MARKET MOVES BACK BELOW 70.00; US ELECTIONS LOOM LARGE AS INVESTORS MOVE TO SIDELINES
October 30, 2020
The ICE Dec cotton contract gave up 237 points for the week ending Oct 30, finishing at 68.92 as the Dec – Mar switch weakened to (86). Dec still managed a 313-point gain for Oct. Last weekend, our proprietary model (timely results provided in our complete weekly report) predicted a finish that would be near unchanged to lower Vs the previous Friday’s settlement, which proved to be correct.
Market Movement from 26th Oct 2020 to 31th Oct 2020
• The ICE Dec cotton contract gave up 237 points for the week ending Oct 30, finishing at 68.92 as the Dec – Mar switch weakened to (86). After touching high of 72.63 market sharply turned downside. ICE Dec contract lost 237 point during the week but still managed 313 points monthly gain for Oct.
DECEMBER FUTURES RALLY, WEATHER REMAINS A CENTRAL CONCERN
• December Futures Extend Previous Week’s Winning Streak • Stimulus Talks Rattle Investors • U.S. Export Sales and Shipments on Target to Hit USDA 2020/21 Forecast • Cotton Belt Harvest Behind Average Five-Year Pace
The trend to even higher prices may not be over, but it has hit a snag — as expected.
After closing at over 72 cents earlier on Monday this week, December futures has now declined 3 consecutive days. Dec closed below 70 cents today for the first time since October 16—in almost 2 weeks.
The Trick-or-Treaters came calling on the cotton market this week and – as advertised all last week – ended the phenomenal two-week rally in cotton prices. While all the bullish momentum has not been lost, cotton prices were due for the gut check that began on Wednesday and concluded on Friday.
Prices hit a low of 69.08 cents, basis December, as fundamental and phycological factors forged the decline. Friday saw the market sink to a low of 68.37, in line with expectations.
The next two weeks will likely be quite volatile, because we are dealing with the US elections, the index fund roll, December fixations, options expiration and another WASDE report. All that with spec longs and trade shorts sitting on their largest positions in two years.
COTTON MARKET CONTINUES TO RALLY, ANOTHER STORM BREWING IN THE GULF
October 24, 2020
The ICE Dec cotton contract gained 137 points for the week ending Oct 23 (547 over the last three weeks), finishing at 71.29 as the Dec – Mar switch strengthened to only (58). Still, Dec finished 84 points off the intraweek high of 72.13. Last weekend, our proprietary model (timely results provided in our complete weekly report) predicted a finish that would be near unchanged to lower Vs the previous Friday’s settlement, which proved to be incorrect.
Market Movement from 19th Oct 2020 to 24th Oct 2020
• ICE cotton futures were down by 64 to 75 points on Friday, but ICE Dec contract gained 137 points during the week. From Friday to Friday, the Dec to March carry fell 9% to 0.58 cents (0.08%). With some profit taking on Friday market gave up some gain but still maintained weekly green closing. This was consecutive third week of upswing. Bull run was started and dominated by China’s ZCE futures.
DECEMBER FUTURES RALLY, WEATHER REMAINS A CENTRAL CONCERN
• December Futures Extend Previous Week’s Winning Streak • Stimulus Talks Rattle Investors • U.S. Export Sales and Shipments on Target to Hit USDA 2020/21 Forecast • Cotton Belt Harvest Behind Average Five-Year Pace
Cotton prices (nearby December futures) have now trekked into territory that no one thought possible a few months ago. Not now, not this soon.
December futures now approaches 72 cents and has thus far gained 2.02 cents for the week, 6.15 cents for the month of October, and 21.53 cents since the horrible low back on April 1. Talk is now already circulating of 80 cents.
Cotton prices continue to ride the uptrend and have now surpassed the initial price goal I earlier established. Yet, the uptrend remains in play and prices are only in the middle of the current trading channel.
The bullish trend accelerated this week and the trade has its back to the wall. The trade net short position is probably at over 15.0 million bales by now and we wonder much longer it will be able to fight this trend.
Potential For Mid-70s But Uncertainty Lingers October 19, 2020
Like a restless bull trying to find a hole in the fence, the cotton market repeatedly challenged 70 cents in every trading session last week.
Like a sturdy fence, each attempt was thwarted, most likely by harvest selling. But have faith, for those of us who’ve worked cattle for any length of time will attest that given enough lee way, a determined bull will most often win over.
COTTON MARKET BREACHES 70.00 ON INCREASED BUSINESS PROSPECTS FROM CHINA, BUT US-CHINA TENSIONS INCREASING
October 18, 2020
The ICE Dec cotton contract gained 228 points for the week ending Oct 16 (410 over the fortnight), finishing at 69.92; the Dec – Mar switch strengthened to (64), well below full carry. 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.
A Correction Seems Likely As Prices Bump Up October 18, 2020
Cotton is pushing toward 70 cents, presenting pricing and risk management opportunities for growers that I’m sure most of us never thought we would see for this crop. It’s decision time. If not priced already, this move certainly seems a good opportunity to get going or add to previous sales.
December futures closed just short of 70 cents on Friday (69.92) —gaining 2.28 cents for the week and, so far, over 4 cents this month. Prices are now the highest in 8 months.
Market Movement from 12th Oct 2020 to 17th Oct 2020
• This was Bull dominated week NY December gained 228 points during the week. Adverse weather in US and India, technical support to spec and steady pace of US export shipment are the main reasons of bull run.
• U.S. Export Sales was poor but shipment was decent to support Bull sentiment.
• ZCE China future gained over 1,000 RMB during week and Chinese buyers have supported whole world's cotton futures.
My Thursday evening search turned up price ideas of 70 cents, 72 cents, 73 cents, 75 cents and – finally – 80 cents. Rightfully so, everyone should have an idea about cotton prices.
The most frequent response was that “it’s over,” meaning the price rally has ended. The current price rally has been persistent, establishing higher and higher lows dating back to April 2.
It is no longer just the futures market that is hot, as cash prices have been rallying due to pent-up demand lately. Whether this is just some temporary strength tied to the upcoming Christmas season or something longer-lasting remains to be seen.
This week, cotton prices inched ever closer to the 68 cents area—breaking above the 65 to 67 cents range that prices have been in for the better part of last month. The move closer to 68 was made on expected crop damage from Hurricane Delta and anticipation that today’s USDA projections for October would show an already reduced US crop compared to the September numbers.
The market finally broke out of its trading range this week, reaching an eight-month high of 68.68 and closing up from its previous close of 67.49 at an all new trading level of 67.64.
This week’s WASDE report initially dropped the market 70 points, showing lowered global stocks by 2.7 million bales. Global consumption was up two million bales while production was down 934,000 bales.
The ICE Dec cotton contract gained 182 points for the week ending Oct 9, finishing at 67.64; the Dec – Mar switch weakened modestly to (78). 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. However, we decided not to trade this bias ahead of the WASDE report’s release.
Market Movement from 05th Oct 2020 to 10th Oct 2020
• This week was Bull dominated week. NY December gained 182 points during this week. Fear of damage due to Hurricane Delta and Weaker dollar were main reasons for the Bull run. Before WASDE NY December climbed to new high 68.68. Trade anticipated USDA to reduce U.S. crop to below 17 million bales but USDA almost maintained same crop as previous month which disappointed speculator. NY December closed at 67.64 after reaching new high.
Love the cotton market, but remember the old trading adage, Short Crops Have Long Tails. USDA’s October supply demand report was a big yawner but did suggest lower world carryover. Thus, the market found the report friendly.
DECEMBER FUTURES SETTLE UP 158 POINTS FOR THE WEEK
• Export Sales Lower Than Previous Week • Hurricane Delta to Impact Cotton Belt • October Crop Production Report and WASDE Released Friday • Report Lowered U.S. Production 19,000 Bales
Tomorrow should make for a lively session, as we have Hurricane Delta's landfall and we get the latest WASDE numbers. Most traders expect a friendly reaction from these events.
The 2020/21 U.S. cotton supply and demand estimates show marginally lower production compared with last month. Production is lowered less than 1 percent, to 17.0 million bales. Domestic mill use, exports, and ending stocks are unchanged. At 7.2 million bales, U.S. ending stocks in 2020/21 are projected at 42 percent of use, compared with 41 percent in 2019/20. The 2020/21 season-average price for upland cotton is forecast at 61.0 cents per pound, 2 cents higher than last month and slightly above the final 2019/20 price of 59.6 cents.
Writing this prior to Friday’s close, I’m thinking it shouldn’t matter much since trading has been sideways for weeks. However, we awoke with news that the President and First Lady have tested positive for COVID-19.
Not surprisingly, this has shaken all markets from the financials to the commodities. At this early hour, cotton has already dropped 90 points. Hopefully, the market’s steadfast resilience in the face of uncertainty will continue.
COTTON MARKET FINISHES WEEK NEAR UNCHANGED, BUMPER CROP IN CHINA
October 03, 2020
ICE Dec cotton gave up 13 points for the week ending Oct 2, finishing at 65.82; the Dec – Mar switch weakened to (81), which is still well short of full carry. 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. The Dec contract gained 63 points for Sept, but the seasonal trend is negative for Oct.
Market Movement from 28th Sep 2020 to 03rd Oct 2020
• NY December close as near to un change W/W. It was cross 66 for some time and go below to 65 for some time but close whole week in very tight range between 65.26 to 65.92.
• U.S. Export Sales was decent and now turkey was main buyer of us cotton.it will show positive sign.
• Next week's WASDE will give new direction to market.
OPEN INTEREST HITS ANOTHER NEW HIGH SINCE FEBRUARY
• Thursday’s Price Range Tightest in Six Weeks • U.S. Dollar Depreciated This Week • Demand for U.S. Cotton is Broadening • Traders Monitor Harvest Pace and WASDE Release Next Week
The market did back-and-fill all week as it likely will until USDA’s November supply demand report provides more clarity with respect to market fundamentals.
Yet, before the market can get to USDA’s November report, it must first decipher next week’s supply/demand report, due out on October 9.
Although some consuming markets have seen a decent recovery, most of cotton’s strength has no doubt come from spec and index fund buying. The trade hasn’t helped matters by building this large unfixed on-call position, from which it is now trying to escape. For that to happen we need to see sell-side liquidity, which has been lacking so far.
Following the market last week was much akin to watching paint dry. Though trading in wide ranges each day, it never failed to work its way back to nearly unchanged, gaining a mere 29 points on the week to close at 65.95.
COTTON MARKET CONTINUES TO CONSOLIDATE AS SEASONAL TREND TURNS BEARISH
September 26, 2020
The ICE Dec cotton contract picked up 29 points for the week ending Sept 25, finishing at 65.95; the Dec – Mar switch tightened significantly at (71). 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.
Market Movement from 21st Sep 2020 to 26th Sep 2020
• NY December future moved in very tight range of 1.5 cent and daily close was below 1% up or down, relatively market remained stable. Big decline in equity market was also ignored by cotton market. Strong dollar, huge sell off in equity, disappointing export sales were the reasons for market to decline but still cotton market was able to close above psychological support of 65 cents.
Trade, Exports Fragile Amid Production Uncertainties
September 25, 2020
The 2020 US crop is projected at 17.06 million bales—the September estimate being revised down 1 million bales from the August estimate. That 17.06 million potential crop has, since the September numbers were determined, been impacted (for the good or bad is yet to be determined) by Hurricane Sally and Tropical Storm Beta. It is also still in question whether the September number fully captured the net effect of Hurricanes Marco and Laura.
TRADING VOLUME LOW THIS WEEK AS PRICES CONFINED TO TIGHT RANGE
• Rough Week in Stock Market • Net New Sales for the Week Totaled 92,700 Upland Bales • Crop Progress Report Showed Modest Decline in Southeast Conditions
As expected, the market did back-and-fill all week, easing above 66 cents after attempting to move marginally below 65 cents. Generally, business was slow, i.e., reflecting a somewhat stale market.
Chinese exports surfaced, but not in the numbers suggested by the commitment of traders report (COT). Additional sales to China do exist and will get reported, but the question remains will the volume push 400,000 bales and/or will the final number be closer to a million bales by the end December?
By being so bearish on the market – justifiably so if we look at the global balance sheet – mills have been holding off on fixations, which paradoxically has created a lot of support for the futures market. In other words, the trade is standing in its own way, making it very difficult for prices to move lower.
Let me first extend our thoughts and prayers to all those impacted by Hurricane Sally. This intense storm wrecked the lives of many as it slammed into the Gulf Coast this past week, slowly making its way through the Southeast and dropping copious amounts of rain over half a million acres of cotton that was only weeks from harvest was in its path.
COTTON MARKET POSTS WEEKLY GAINS BUT FALTERS POST RELEASE OF BLOCKBUSTER EXPORT DATA
September 19, 2020
The ICE Dec cotton contract gained 85 points for the week ending Sept 18 finishing at 65.66, the Dec – Mar switch tightened a bit at (92). Last weekend, our proprietary model (timely results provided in our complete weekly report) predicted a finish that would be near unchanged to lower Vs the previous Friday’s settlement, which proved to be incorrect.
Market Movement from 14th Sep 2020 to 19th Sep 2020
• Week started with all bullish news. Bullish WASDE, hurricane Sally, weaker dollar. All these all factors created Bullish sentiment and NY December touched new high of 66.93 on Tuesday.
• Robust export sales on Thursday above 5 Lakh bales in which China bought above 4 Lakh bales. Despite good sales market closed in red and week closed with just 85 points weekly gain.
I knew we were possibly in for disappointment price-wise when I read a pre-landfall news headline that said that the market was “mulling” Hurricane Sally. In other words, not sure of what the impacts, if any, might be.
A Short-Term Opportunity Thanks To European Consumers?
September 18, 2020
After assessing limited damage resulting from Hurricane Sally, cotton prices eased slightly lower in Friday trading, settling the week at 65.66, basis December.
Significant damage occurred only in south Alabama but did sweep across the entire state and into a portion of Georgia. However, the very significant Southwest Georgia crop was generally spared.
Adjustments were made today that should be favorable for prices. USDA has now moved closer to what the “boots on the ground” have said along. This should help provide support for the market.
Like a prizefighter with a cast iron jaw, the cotton market has taken punch after punch in recent weeks but still have come off the ropes swinging. Since April, every 2- or 3-cent gain has been followed by a 1- or 1.5-cent decline.
USDA rewarded my two-week-old price flip-flop with Friday’s release of its September world supply demand report. While both world and U.S. stocks were lowered, the reductions came from the supply side of the price equation.
COTTON MARKET SETTLES EFFECTIVELY UNCHANGED FOR SECOND CONSECUTIVE WEEK; SALLY CHURNING IN THE GULF
September 14, 2020
The ICE Dec cotton contract gave up 18 points for the week ending Sept 11 finishing at 64.81; the Dec – Mar switch was effectively unchanged at (97). Last weekend, our proprietary model (timely results provided in our complete weekly report) predicted a finish that would be near unchanged to lower Vs the previous Friday’s settlement, which proved to be correct,
DECEMBER FUTURES SETTLE UP AT END OF SHORTENED TRADING WEEK
• Export Sales Report Continued Previous Months’ Pattern • USDA Cut U.S. Production Estimate in WASDE Report • Possible Effects of Recent Weather Front of Mind
The market is still devoid of any strong selling, as index funds continue to accumulate longs and the trade is probably going to transition to a net buyer of futures once the crops are in. This leaves only speculators as strong potential sellers.
The 2020/21 U.S. cotton estimates include slightly higher beginning stocks relative to last month but lower production, mill use, exports, and ending stocks. Production is lowered 1.0 million bales to 17.1 million, with a lower projection for every region. Mill use is projected 200,000 bales lower this month, but compared with its revised 2019/20 level is still expected to rise 16 percent. Exports and ending stocks are 400,000 bales lower, reflecting reduced U.S. supply and stronger foreign competition.
Cotton prices are once again looking vulnerable and on an uncertain path to who knows where. Dec futures closed down 97 points today after pretty much treading water last week thanks to a good day on Friday. The market all of a sudden looks to have lost some of its upward steam. But, this is the repeating choppy pattern of the past 5 months — make a run then retreat a bit, make another run then retreat a bit, make another run then retreat a bit.
COTTON MARKET SETTLES EFFECTIVELY UNCHANGED ON WEEK; SEPTEMBER WASDE RELEASE ON FRIDAY
September 07, 2020
The ICE Dec cotton contract gave up 9 points for the week ending Sept 4, finishing at 64.99. The Dec – Mar switch weakened (98) but remains well below full carry. Last weekend, our proprietary model (timely results provided in our complete weekly report) predicted a finish that would be near unchanged to lower Vs the previous Friday’s settlement, which proved to be correct.
Active trading last week led to a great deal of price volatility. After surpassing 66 cents early, it yielded to signs economic recovery may be progressing at a slower pace than hoped.
Market Movement from 31st Aug 2020 to 05th Sep 2020
• This week was volatile and bull dominated week. NY December Future was able to cross 66 cents psychological level and made double top on 66.44 cents, but was not able to sustain and close over 66 cents. Weaker dollar and spec buying pulled NY futures but ultimately week ended with win-win at 64.99 Cents losing 9 point a week.
• U.S. Export Sales and shipment was good. Big quantity of shipment to China.
• Prices Unable to Hold Gains This Week • Continuing Jobless Claims Decreased by 1.24 Million • China is Week’s Top Buyer of U.S. Cotton • More Rain Forecasted, but Uncertain
Once again, cotton is pushing 66 cents. Prices (Dec futures) have not been able to successfully break (close above) 66 cents although trying a few times recently. Dec gained 58 points last week and thus far is up another 148 points this week (thru Tuesday, September 1)—closing at 66.34 cents today.
Prices have made a steady but choppy trend up since early April. August was a good month—Dec futures gaining 335 points during the month.
Spec and index fund buying has been propping the market up, but trade selling has capped the rally near 66 cents and forced a retreat. With outside markets looking shaky at the moment, we don’t expect specs to chase cotton prices higher at this point.
Support is most likely going to come from scale-down fixation buying, but this could change if outside markets were to switch into ‘risk off’ mode.
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.
Growers were greeted this past week with an excellent pricing opportunity, whether it was for old crop or those looking to forward price new crop. Following a jump in the LDP to 340 points, the December futures contract closed above 66 cents on Tuesday before ending the week at 65.08.
COTTON MARKET SETTLES HIGHER ON WEEK, BUT HURRICANES LOOK LIKE ANOTHER “BUY-THE-RUMOR, SELL-THE-FACT” EVENT
August 31, 2020
The ICE Dec cotton contract picked up 80 points for the week ending Aug 28, finishing at 65.08 even as the contract breached the 66.00 level over the course of the week. The Dec – Mar switch was strengthened a bit at (85).
Market Movement from 24th Aug 2020 to 29th Aug 2020
• China cancelled some old US cotton bargain but purchased new contract in weekly export sales. US Export Shipment was lower but good number of shipments to China is a positive sign for market.
• Continuing Jobless Claims Fell About 300,000 to 14.5 Million • Texas and Oklahoma Crop Conditions Slipped Sharply This Week • Assessing Damage from Hurricane Laura
Futures rallied to a fresh six-month high this week. Last Friday’s trading range was one of the smallest ranges in several weeks, but Monday made up for it. December futures surged as the market grappled with the possibility of two hurricanes in the Gulf of Mexico at the same time.
Flip Flop!! The opening sentence last week was, “The Big Bear.” Finally, I am happy again. The Big Bull.
Prices are going up and 2021 plantings are going up. While near-term fundamentals remain bearish, a bull beginning to grow, and he will reach maturity.
Two tropical systems caused the market to trade in typical ‘buy the rumor – sell the fact’ fashion this week, and now that the storms are gone without inflicting much harm, we might see prices pull back some more from here.
Dec20 futures knocked on the door of 66 cents (closed at 65.82 cents per lb) today—the highest daily close in 6 months. Dec gained 1.43 cents last week on weather concerns and a good export report and gained another 1.54 cents today.
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.
This month’s 2020/21 U.S. cotton outlook includes higher beginning stocks, production, and ending stocks, and a decline in consumption. Production for the 2020 crop is raised 3 percent to 18.1 million bales, on NASS’s first survey-based production forecast. The survey indicates lower harvested area and higher yield compared with last month’s expectations. Abandonment is expected to rise to 24 percent—compared with 16 percent in 2019.
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.
Post estimates marketing year (MY) 2019/20 cotton production at 29 million 480 lb. bales (37.1 million 170-kilogram bales/6.3 MMT) with a planting area of 12.7 million hectares. MY 2019/20 mill consumption remains weak as mills accumulate greater cotton yarn stocks due to poor demand. Export prospects have diminished while imports are expected to remain stable as they are price competitive against domestic supplies.
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.
