Friday, March 07, 2014

Rose on Cotton: Win Some, Lose Some – WASDE Will Set the Tone

AgFax.Com - Your Online Ag News Source


I recalled this week, on more than one occasion, my first intramural softball game as a college undergraduate (a few years back) in which I had to live down fanning out on three straight swings. It was a slow-pitch softball game, and I had been the lead-off batter. In my defense, it had been a number of years prior since I had even stepped on the field and I have never won any awards for by softball (or baseball) prowess.

The first paragraph was, of course, an analogy to my woefully wrong weekly directional call for the trading week that closed today. We had expected a weekly settlement near unchanged to possibly lower, which was pretty much 180 degrees from what actually happened.

We thought that the market would need to test 86.00 again in order to stir demand and fixations, and we expected a relatively poor export report for the week ending Feb 27, which actually turned out to be quite strong.

 

It began with the Russians showing up uninvited in Crimea. The grain markets moved higher with the threat of commodity flow interruptions, and cotton kept pace. All the while, the US dollar continued to trade near to and below the 80.00 level. The export report was, it seemed the final straw. Both shipments and net sales far exceeded the per week requirements to meet the USDA’s 10.5M bale export projection as well as the general expectations of the trade. The market meandered a bit before working higher, triggering stop orders along the way on Thursday, and did not stop until early this morning when it reached a new high for the current move of 93.35.

Trading was volatile this week on the front month, and this is unlikely to abate within the near future. The USDA will release its monthly WASDE report on Monday, Mar 10 at 12:00 PM, US EST, and any unexpected estimates will likely excite the market again. Bloomberg News released the results of their monthly survey (to which we contribute) which stated general expectations for US ending stocks to be projected at 2.84M bales, via a slight increase in the US export projection. Our estimate of the likely US ending stocks projection is 2.9M bales, but I will not be shocked if it is unchanged, once again. The world S&D is expected, on average, to remain largely unchanged, except, perhaps, for a modest reduction in the production projection, and we concur.

Looking forward, the front month will search for equilibrium in finding price levels at which sales and fixations can be accomplished, but that will also ensure sufficient US stocks to last until the new crop can begin being delivered. At this time, we do not believe that that level is at or above 93.00, but that may be coming.

Demand has followed the market higher over the current 1400 point (weekly) bull run, and the recent dip to near 86.00 was obviously more significant than any variation of sales period average price. And, as US production is likely to be ~200K bales less than the USDA’s current estimate, the market will need to push higher to ration demand.

Concerning Dec 14 (we called this one right) it should continue to move higher, given recent corn and soybean price movements and the persistent droughts in west Texas and California. We agree with the current consensus that planted acreage should be in the neighborhood of 11.3M acres.

The tone for the front month will likely be set by the WASDE release; the market seems to have been trading a US carry-out of 2.8M bales, or less, so, perhaps, the most bearish thing that could happen would be for the USDA to meet or exceed these expectations. A static ending stocks projection will likely be discounted. World aggregate ending stocks, outside of China, should also be heeded – especially if any portion of a reduction is attributable to India.

For the week, some of our proprietary analyses call for a W/W settlement gain, but at this time we think it will likely finish near unchanged to lower on volatile trading action while trading a range of 88.00 – 92.50 on the inside or 86.50 – 93.75 on the outside.

The Rose Report weekly edition is published and made available free of charge as a courtesy to producers, ginners, merchants, agents and all others who have an interest in the cotton market. To obtain a free trial of the more comprehensive and up-to-date Rose Report daily edition or to learn more about our other cotton analyses and analytic services please visit: http://www.rosecottonreport.com/.

Louis W Rose IV, PhD has worked with cotton as a producer, consultant, analyst and trader. Rose holds degrees in Education, Agriculture, Plant Science and Business (MBA) from AR St Univ, OK St Univ and the Univ of Memphis, respectively. He has held positions with Aon Reinsurance and Cargill Cotton. Rose currently provides analytic services for various clients and media outlets and is the co-founder of Risk Analytics, LLC, producers of The Rose Report, which he authors. For more info on The Rose Report or analytic services, please visit: www.rosecottonreport.com.

 

Tags: ,


Leave a Reply

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

Sunbelt Ag News

    DTN Livestock Midday: Cash Cattle Trade Supports Futures12-24

    DTN Grain Midday: Wheat Plunges, Leads Trade Lower12-24

    DTN’s Top Ag Stories: Resistant Weed Worries Spread12-24

    DTN’s Top Ag Stories: Obama Issues Immigration Order12-24

    DTN Cotton Open: Slightly Lower on Light Volume12-24

    DTN’s Top Ag Stories: Brazil, Argentina Produce More Soybeans12-24

    DTN Livestock Open: Hog Futures to Begin Lower12-24

    DTN Grain Open: Soybeans Start Out Lower12-24

    Keith Good: Embattled Railroads Get Thumbs Up; Hog Numbers on Rise12-24

    DTN Livestock Close: Short Covering Moves Lean Hogs Higher12-23

    Doane Cotton Close: Prices Drop in Final Minutes of Trade12-23

    DTN Cotton Close: Mixed as March Slips12-23

    AFB Grain-Soybean Close: Wheat, Corn Move Higher, Soybeans End Mixed12-23

    AFB Cotton Close: Market Turns Slightly Lower12-23

    AFB Rice Close: Futures Slightly Higher12-23

    Shurley on Cotton: Crop Insurance, Marketing Advice for 201512-23

    USDA: Weekly National Peanut Prices12-23

    DTN Grain Close: Wheat Advances In Light Trading Session12-23

    DTN Fertilizer Trends: Urea Price Shows Some Weakening12-23

    Iowa Survey: Weed Resistance Seen as Daunting Problem — DTN12-23

    RMA Records Can be Easiest Option for Updating Farm Yields12-23

    Arkansas: Pinnacle Ag Acquires Gillett Grain12-23

    Senate Passes Barge Tax to Fund Waterway Repairs – DTN12-22

    Farm Shops: Small Size Can Still Tackle Big Work Orders – DTN12-22

    It’s Official: Viptera Trait in Corn, DDGs Approved by China — DTN12-22

    Welch on Grain: Corn Acres Projected at 88M in 201512-22

    Welch on Wheat: Prices Respond to Russia Uncertainty12-22

    Louisiana Rice: 6 Producer Meetings Slated for January, February12-22

    Flint on Crops: Memories of Country Christmases Rekindle the Spirit12-22

    DTN Livestock Close: Cattle Futures Rebound With Triple-Digit Gains12-19

    Doane Cotton Close: Another Choppy Week Ends Slightly Ahead12-19

    Mississippi Crop Values to Top $7B for 3rd Straight Year12-19

    Alfalfa: Dupont Pioneer Sells Alfalfa Seed Biz To S&W12-19

    John Deere Sells Crop Insurance Arm To Farmers Mutual Hail12-18

    Sunbelt Ag Events

     

    About Us

    AgFax.Com covers agricultural trends and production topics, with an emphasis on news about cotton, rice, peanuts, corn, soybeans, wheat and tree crops, including almonds, pecans, walnuts and pistachios.

      

    This site also serves as the on-line presence of electronic crop and pest reports published by AgFax Media LLC (formerly Looking South Communications).

        

    Click here to subscribe to our free reports.

      

    We provide early warnings and confirmations about pests, diseases and other factors that influence yield. Our goal is to quickly provide farmers and crop advisors with information needed to make better and more profitable decisions.

         

    Our free weekly crop and pest advisories include:

    • AgFax Midsouth Cotton, covering cotton production and news in Alabama, Arkansas, Louisiana, Mississippi, Tennessee and Missouri.

    • AgFax Southeast Cotton, covering cotton production and news in Alabama, Florida, Georgia, North Carolina, South Carolina and Virginia.

    • AgFax Southwest Cotton (new for 2013!), covering cotton production and news in Texas, Oklahoma, Kansas and New Mexico.

    • AgFax West (formerly MiteFax: SJV Cotton), covering California cotton, alfalfa, tomatoes and other non-permanent crops in California's Central Valley.

    • AgFax Rice covering rice production and news in Arkansas, Louisiana, Mississippi, Missouri and Texas.

    • AgFax Peanuts, covering peanut production in Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, North Carolina, South Carolina, Texas and Virginia.

    • AgFax Southern Grain: covering soybeans, corn, milo and small grains in Southern states.

    • AgFax Almonds, covering almonds, pistachios, walnuts and other tree crops in California's Central Valley.

    • AgCom 101, providing guidance to ag professionals involved in social media.

    Our newsletters are sponsored by the following companies: FMC Corporation Chemtura Dow AgroSciences.

          

    Mission statement:

    Make it as easy as possible for our community of readers to find and/or receive needed information.

              

    Contact Information:

    AgFax Media. LLC

    142 Westlake Drive Brandon, MS 39047

    601-992-9488 Office 601-992-3503 Fax

    Owen Taylor Debra L. Ferguson Laurie Courtney

          

    Circulation Questions?

    Contact Laurie Courtney