Agfax Buzz:
    May 16, 2014
    cleveland_oa

    Cleveland on Cotton: Calm Before the Storm? Dry and Wet Push Market.

    AgFax.Com - Your Online Ag News Source

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

    Friday marked the 5th consecutive day of lower closes for the New York ICE old crop and new crop cotton futures. Yet, the true surprise was the absence of any price volatility during the week.

    During a period when every analyst and their respective brothers-in-law predicted extreme volatility, the market was calm. In fact, trading typically was within single and double digits, all but unheard of for the past several years.

    The real possibility is that this truly is the darkest hour before dawn. Too, the market offered scant new fundamental news.Yes, U.S. export sales, the largest exporter of cotton to the world market, were a downer this week, but A-cancellations were nil, and B-it is still cold/wet/windy in China as well as cold/wet in the Southeast and Midsouth.

    With respect to production volume it is only dryer on the Texas Plains.  Thus, fundamentals remain positive.  Additionally, it was thought that textile mills had been active in fixing the price of their on-call sales, but this proved to be incorrect as demonstrated by exchange reports.  Thus, those call sales continue as a firm base of support for the market.

    california-cotton-palm-tree-row-03172014-facebookThe old crop slide to just below 90 cents this week is now testing the patience of the bulls, and rightfully so. Prices have reached near the very bottom of the range that must hold if the speculative funds are to remain on the long side of the market.

    Were they to exit in mass, the July futures could now slip to near 86 cents. However, the trading range remains in play and until July falls below 87-88 cents. The dominant trading range will continue to be in the 92 to 95 cent area, with an expanded range of 87 to 100 cents.

    As commended the past several weeks, cotton demand does not support a price above 94-95 cents. Yet, the significantly large volume of unfixed on-call mill sales, coupled with the extremely large quantity of speculative fund longs in the July contract, could enable another run at 95 cents. Nevertheless, the tug-o-war will continue.

    As mentioned last week, USDA’s bold and unusual significant reduction in its projection for the 2014 crop, took a bit of uncertainty out of the market. That is, the large group of speculative traders that had been positioning themselves for a weather related bull market based on the Texas drought (don’t forget about the California drought…yes the acreage is small, but that is 4-bale-per-acre plus land that is lost to cotton), were put on notice that the move above 82 cents in the December contract signaled that the market now “expected” a considerable decline in U.S. production due to the drought.

    It will be necessary for the “severe drought” to continue if December is to hurdle the 85 cent mark. There remains plenty of time to get the Midsouth and Southeast crop in, but weather delays are considerably more than normal.

    Nighttime temperatures have consistently been in the high 40s and very low 50s, far too low for cotton planting. This will have to change immediately or there will be “real” yield loss. The Texas Plains has its best shot at moisture in 6 months a week from now as the 10 day forecast predicts next weekend there is a 70% chance of rain one day and a 30% change the other two days. The trading range continues.


    Tags: , , , , , , ,

    Leave a Reply

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

    Agfax Cotton News

    DTN Cotton Close: Settles to Marginal Losses10-1

    Florida: Nematodes Create Problems in Multiple Crops10-1

    DTN Fertilizer Trends: State Averages for Anhydrous Vary Widely10-1

    DTN Cotton Open: Edges Higher within Tight Ranges10-1

    Keith Good: U.S., Brazil Reportedly Agree to Settle Cotton Dispute10-1

    Farm Bill Decision Deadlines and the Farm Bill Toolbox9-30

    Doane Cotton Close: Analyst Predicts 40 Cent Futures9-30

    AFB Cotton Close: Futures in the Red9-30

    DTN Cotton Close: Slips to New Lows9-30

    AgFax Cotton Review: Global Supply Hurts Prices; Cotton Transition Assistance Program Deadline Looms9-30

    Texas Crop Weather: Hay Supplies Range from Surplus to Practically Non-Existent9-30

    DTN Cotton Open: Trades on Slight Loss Near Low9-30

    Keith Good: ‘Misinformation’ Muddles Clean Water Act, EPA Chief Says9-30

    California: Rice Harvest Progress as Rains Move Through Northern Areas – USDA9-29

    AFB Cotton Close: Inside Day Finishes Lower9-29

    South Carolina: Rains Halt Peanut Harvest, Field Work – USDA9-29

    Alabama: Harvest Advances as Dry Weather Persists – USDA9-29

    Mississippi: Dry Weather Prevails, Good for Field Work — USDA9-29

    Arkansas: Corn, Rice Harvest Start to Wind Down – USDA9-29

    Georgia: Weather Causes Issues in Some Areas — USDA9-29

    Texas: Harvest, Wheat Planting Continue Among Widespread Rains – USDA9-29

    Oklahoma: Limited Moisture for Winter Wheat Seedlings – USDA9-29

    Arizona: Cotton Harvest Begins, Crop Condition Good — USDA9-29

    Doane Cotton Close: Harvest Progress Still Sluggish9-29

    North Carolina: Rains Delay Harvest, Corn Harvest 71% Complete – USDA9-29

    Kansas: Rains Slow Harvest, Wheat Planting – USDA9-29

    DTN Cotton Close: Finishes Inside Day Slightly Lower9-29

    Virginia: Rains Slow Corn Harvest – USDA9-29

    Tennessee: Good Harvest Progress, Pastures Need Rain – USDA9-29

    Soybean Harvest Rises by 7 Points, Corn 5 — DTN9-29

    Missouri: Corn, Rice Harvest Make Good Progress, Soybean Harvest Begins – USDA9-29

    DTN Cotton Open: Trades Near Unchanged in December9-29

    Tennessee Cotton: Forecast Looks Favorable for Defoliation9-29

    Flint on Crops: What is a Good Variety Worth?9-29

    Keith Good: Plunging Corn, Soybean Prices May Strain Farm Budgets9-29

    Rose on Cotton: Bearish News – We got plenty.9-26

    Cleveland on Cotton: Chinese Moves Send Market into Free Fall9-26

    Doane Cotton Close: May Dip Under 60 Before Reaching Harvest Lows9-26

    AFB Cotton Close: Recovers from Huge Sell Off9-26

    DTN Cotton Close: Ahead for Day, Down for Week9-26