Agfax Buzz:
    August 24, 2013
    oa-cleveland-mississippi-05182012

    Cleveland On Cotton: Rally Hits the Ground; Likely Hang in 81-89 Cent Range

    AgFax.Com - Your Online Ag News Source

    By O.A. Cleveland, Professor Emeritus, Mississippi State University

    Just as quick as cotton prices climbed to a 14 month high the entire rally was lost even quicker. What took a bit more than a week to build crashed back to earth is just two days. The demise was just as quick and fatal as the Sun melting the wings of the legendary Icarus.

    The rally was promoted by 3 factors:

    1. Deteriorating crop conditions around the globe
    2. A record high long position initiated by fund longs
    3. Technicals screaming for higher prices with the breakout from a symmetrical triangle formation.

    The breakout was a strong 7 cent plus rally, but the collapse was just as big and even far quicker. Too, the action once again demonstrated how the market gives second chances.

    The market collapse began Sunday evening (8-18) when it became evident that prices had pushed far past demand and that the speculative buying had played out. Speculative buying was reduced to nil as merchants, neither able to buy physical cotton nor able to get grower fixations, were left without any selling power. With no selling, buyers were left to fall on the sword and that they did. Thus, it was the selling that became nonexistent and put an end to the speculative longs feast. Without any selling, and with longs holding only paper without any rights to cotton, the market was over ripe for a collapse.

    Too, it was evident that the rapid price advance had left most demand behind. Chinese mills reported a total absence from the market, noting that the high priced local cotton was, at the new price activity, cheaper than futures. Yet, even at that, weekly export sales were actually surprising as some 81,000 RBs of Upland and 10,800 RB of Pima were sold during the 91-93 cent period. This week’s lower price activity has brought about more demand from mills, including Chinese mills

    Just as the market gave cotton growers a second chance, it is now offering mills a second chance. While a trip down to 79-81 cents remains a possibility, the long term support near 82 cents continues to hold firm. Mills will likely begin buying in volume on any trade below 84 cents. However, there may be enough picking and scratching at the 84 cent area to prevent a drop below that level. Yet, do not discount another test of the 81-82 cent level.

    Cotton prices have returned to their long term trading range and will likely remain within that 81-89 cent trading range for some time. Yet, we still need to closely monitor the events of Mother Nature. With an estimated 50% of the Texas High Plains planting abandoned, weather conditions in other regions and countries must be closely monitored. The December 2014 contract has slipped down to just a shade about 77 cents.


    Tags: , , , ,

    One Response to Cleveland On Cotton: Rally Hits the Ground; Likely Hang in 81-89 Cent Range

    1. Bob McDonald says:

      I enjoy your comments on cotton, It’s helping me market my 2013 crop.

    Leave a Reply

    Name and Email Address are required fields. Your email will not be published or shared with third parties.

    Agfax Cotton News

    Mississippi: Bollworm Counts at High Levels7-29

    Alabama Cotton: Spider Mite Control Proves Tricky7-29

    Keith Good: Bugs’ Resistance to GMO Corn in Brazil Proving Costly7-29

    California: Over 75% of Cotton Has Set Bolls – USDA7-28

    Virginia: Torando Damages Crop, Conditions Lower Than Last Year7-28

    Doane Cotton Close: Rebounds from Oversold Conditions7-28

    Arkansas: Rice Heading, Heat Units Need in Some Areas – USDA7-28

    Mississippi: Crops Look Good, Rains Prevent Some Field Work – USDA7-28

    Oklahoma: Crop Conditions Positive Despite Triple-Digit Temps – USDA7-28

    Texas: Cotton Squaring, Forming Bolls, Sugarcane Aphids Will in Sorghum – USDA7-28

    Alabama: Scattered Rainfall, Army Worms In Certain Areas – USDA7-28

    North Carolina: Rains Benefit Crops, Slow Field Work – USDA7-28

    AFB Cotton Close: Moves Higher in Narrow Range7-28

    Crop Progress: Corn, Soybean Conditions Decline, Still at Historical Highs – DTN7-28

    Arizona: Cotton Squaring Complete, Winter Wheat Harvested – USDA7-28

    DTN Cotton Close: Higher on Suspected Weekend Business7-28

    Tennessee: Keeping Up with Insecticide Names, Ingredients7-28

    Florida: Corn Harvest Slowed by Wet Conditions – USDA7-28

    DTN Fertilizer Outlook: Domestic Ammonia Prices Down Slightly7-28

    DTN Cotton Open: Trades Modestly Ahead7-28

    Tennessee Cotton: Crunch Time for Insect Management7-28

    Flint on Crops: Challenges for Farmers Keep Coming, Keep Changing7-28

    Kentucky: Biosolids Becoming Viable Fertilizer Option7-28

    Keith Good: July 1 Cattle, Calf Inventory Comes in at Historic Low7-28

    California Cotton Moving Quickly, Aphids And Whitefly Around – AgFax7-27

    California Cotton: Crop Setting Up Along 2 Very Different Paths7-26

    California Cotton: Heat Effects, PGR Decisions7-26

    Texas Cotton: Lygus Uptick Noted – Hale And Swisher Counties7-26

    USDA Commentary: Weekly Cotton Markets, Weather by Region7-25

    Rose on Cotton: No Pleasure in this Market Made for Bears7-25

    Georgia Cotton: Aphids Down, Plant Bugs Still Around7-25

    Doane Cotton Close: Futures Continue Lower After Midweek Rally7-25

    South Carolina Cotton, Soybeans: Insects on the Rise7-25

    Mississippi Cotton: Transform Efficacy on Aphids Decreases with Cool Temps7-25

    AFB Cotton Close: Sell-Off Continues7-25

    DTN Cotton Close: Settles on New Contract Lows7-25

    Arkansas: New iPhone App Simplifies Farmers’ Finances7-25

    Shurley on Cotton: Prices Try to Stabilize, Still Show Weakness7-25

    DTN Cotton Open: Extends Losses in Early Going7-25

    Keith Good: Declining Commodity Prices Foreshadow Ag Slump? Maybe.7-25