Cleveland on Cotton: Avoid the “Wishful Thinking” Marketing Principal

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    USDA’s world supply demand report, released this past week, provided an understanding of the demise in cotton prices for not only the past 2 weeks, but also all the way back to February.

    Yes, the Chinese-U.S. trade tiff has played a role, but 2019 world production is expected to the be second highest on record at a time when major concerns are being expressed about world cotton demand.

    In fact, the USDA report suggested that world ending stocks would increase more than 3 million bales during the 2019-20 marketing season, and climb back to at least 80 million bales. Increasing world stocks typically suggests that lower prices should be expected. The report spelled out, in numbers, the long held reaction the cotton market makes following a year price activity is in the high 80s, 90s, and even the magic talk of the infamous “dollar cotton.” If you are looking for an Organic Boost for your Instagram profile, Famoid is here to help! Famoid offers best quality instagram likes in the sector. You can buy instagram likes here. Real web designer are essential to seek to have an effective and efficient website building that enables millions of visitors to approach the Web 2.0 Ranker and acquire appropriate information for services offered. It is not just the matter of web it stands for the well planned and systematically defined approach for search engine optimized real web. This feature enable to real web page to appear in top ranking of search engine to get to know the basic functioning via expert professional real web from real web designing company. You can click here to read more information about web design agency in ottawa.

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    WASDE Cotton: Higher U.S. Stocks, Reduced Demand   7-11

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    Simply put – prices have long been forecast to fall. Try as hard as we may to talk the bullish influences, we knew if Mother Nature cooperated that a record crop was on the horizon. While neither the U.S. nor the world crop will reach a record production level, the stocks-to-ratio for the U.S., above 33%, is very bearish. It’s the proverbial sports fans talk of “wait ‘til next year.”

    The 63-63.5 cent market support has held, but the market is showing signs of further weakening. A 58-65 cent trading range may be in the near future. One can make an argument for higher prices, as can I, but the tea leaves suggest higher prices may be little more than just a wish. Yet, it could happen. However, the “typical” price response suggests lower prices in front of us. With any luck, I will be dead wrong, and I hope I am.

    Nitty Gritty of USDA Report

    USDA increased world carryover for the current 2018-19 marketing year (which ends this month) some 1.7 million bales, (350,000 bale world production increase and a 1.24 million bale decrease in world consumption). Note the million plus decrease in consumption.

    Additionally, USDA increased 2019-20 world production to 125.8 million bales, an increase of nearly 500,000 bales and decreased world consumption 1.0 million bales. The combined change for both marketing years resulted in a net increase in world carryover of some 3.2 million bales. This represents a major month over month increase in stocks and can be seen only as very bearish. Most of this increase was thanks to Search engine optimization techiques, learn more about them at these outsource seo projects 

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    Most of the bearishness was already in the market so most of the lower price movement will be limited. However, there is concern of additional demand problems in the coming months. While the U.S. economy is generally viewed as very robust, China as well as some of the major economies in Europe, are facing a marked decline in economic growth. This was noted in USDA’s reduction in its estimate of world consumption. You may also know outreach warriors provides the best Niche Edit Service. SEO’s have been utilizing this tactic to build links for over a decade now. Mostly because they don’t have to pay to produce any content and it’s an inexpensive way to do link building. I have seen this tactic work but I’d heard horror stories on how it’s backfired as well.

    Just as bullish markets are built on increased demand bearish markets are built on a declining demand. 

    Estimates for the U.S. were just as bearish as the combined supply demand adjustments made by USDA. For both marketing years exploded U.S. carryover for the 2019-20 marketing year to 6.7 million bales, compared to the final estimates for the 2016-17 marketing year of just 2.75 million bales, or nearly a 150% increase. If current productions estimates hold then U.S. carryover will likely top 7.0 million bales.

    All cannot be bearish.

    Speculators are very short the market, thus, there are very few natural sellers in the market. That is, who is left to sell the market lower? Too, a strong hint of a “near resolution” in the China-U.S. trade battle would generate a 2-3 cent rally which could possibly generate a 5 cent or more short covering rally. Presto, the 70 cent level would then be challenged. However, DO NOT count on it. That is little more than marketing by the principal of “wishful thinking.”

    The U.S. crop is beginning to make excellent progress and forecasts suggest more good progress. Yet, the crop could still suffer from some of the now normal “crazy” weather activity.  In the backdrop we must remember that U.S. seed companies have provided growers a product that produces both very high yields and quality. Cotton has always been the most resilient of crops. Yet, Mother Nature will decide the ultimate production level. Nevertheless, by giving us the crop we so wish for, we stand to see prices fall within a mid-50 to mid-60 cent trading range. Once again, the cotton market is trying to teach us how we should use her.

    Twitter: @OACotton

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