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

    Rose On Cotton: Export Sales, Shipments Bear Watching4-18

    Georgia: Chemical Mixing Problems4-18

    Arctic Warming Tied to Our Extreme Weather? Maybe. – DTN4-18

    CBOT Markets Closed on Good Friday4-18

    Keith Good: China’s Secret – Contaminated Farmland; Expect Drought Persistence4-18

    Cleveland on Cotton: Nervous Market Nellies; Chinese Plant 20-25% Less4-17

    Doane Cotton Close: Heavy Volatility Continues in Old-Crop Prices4-17

    AFB Cotton Close: New-Crop Continues to Show Strength4-17

    DTN Cotton Close: Finishes Mixed Ahead of Long Weekend4-17

    U.S. Drought Outlook: Improvement Expected in Midwest, Central and Southern Great Plains4-17

    DTN Cotton Open: Trades Slightly Lower Nearby4-17

    U.S. Energy: Oil and Gas Spending Favors Exploration, Development4-17

    Gasoline Prices: Average Jumps 6 Cents4-17

    Propane Stocks: Increase by 0.8M Barrels4-17

    Diesel Prices: Average Down a Penny4-17

    Keith Good: Beige Book — Observations on Ag Economy4-17

    Keith Good: China’s Rejection of GMO Corn May Have Cost U.S. Ag $2.9B4-17

    Doane Cotton Close: Strong Finish Despite Continued Dry Weather4-16

    International Buying and Selling a Balancing Act to Get the Best Deal – DTN4-16

    AFB Cotton Close: Regains Losses and Then Some4-16

    Missouri: Insect Spray Guides Are Now Available (Better Late Than Never)4-16

    DTN Cotton Close: Triple-Digit Old-Crop Gains4-16

    DTN Cotton Open: Futures Trading in Green4-16

    Keith Good: Cold Snap on East Coast Troubling; Wheat Futures Up Again4-16

    Doane Cotton Close: Market Gives Back Gains4-15

    Texas: Conservation Farming Meeting Weslaco, April 294-15

    AFB Cotton Close: Prices Move Lower4-15

    DTN Cotton Close: Loses Ground as Intercrop Spreads Narrow4-15

    Fertilizer Prices on the Rise but Still Lower Than Last Few Years4-15

    Texas Crop Weather: Freeze Puts Wheat at Risk of Injury4-15

    Tennessee: Late-Season Burndown Options for Cotton, Soybeans4-15

    AgFax Cotton Review: Now’s a Good Time to Price New-Crop; Rains in Texas but Not Enough4-15

    DTN Fertilizer Trends: Rail Delays Affecting Prices in Upper Midwest4-15

    DTN Cotton Open: Trades Mixed in Quiet Dealings4-15

    Keith Good: Ukraine Concerns, Weather Behind Surge in Grain Prices4-15

    Crop Progress: 3% of National Corn Crop Planted, Wheat Continues Decline – US-DA4-14

    Doane Cotton Close: New-Crop Down Despite Triple-Digit Old-Crop Gains4-14

    Arizona: Cotton Planting Reaches 35% – US-DA4-14

    California: Cotton Planting Advances Rapidly – US-DA4-14

    Louisiana: Glyphosate Resistance Confirmed in Italian Ryegrass4-14

    Texas: Wheat Conditions Continue to Decline – US-DA4-14

    DTN Cotton Close: Settles on Strong Old-crop Gains4-14

    Oklahoma: Small Grain Crop Conditions Declining – US-DA4-14

    DTN Cotton Open: Jumps to Triple-Digit Old-Crop Gains4-14

    Keith Good: Farm Incomes Expected to Drop 27%; Cotton Market Overheating4-14

    Doane Cotton Close: Freaky Friday with Last Minute Price Surge4-11

    DTN Cotton Close: Flat to Higher on Late Rally4-11

    AFB Cotton Close: Dec. Posts Strong Gains4-11

    DTN Cotton Open: Market Bounces Up After Settling in Red 3 of Last 4 Sessions4-11

    Keith Good: Senators Defend GMO Technology; Crop Insurance Distribution by State4-11

    Doane Cotton Close: Triple-Digit Losses on Disappointing Exports4-10

    DTN Cotton Close: Sharp Losses Nearby4-10

    AFB Cotton Close: Nearby Ends Below 90 for 1st Time in a Month4-10

    DTN Cotton Open: New Session Low Following Export Report4-10