Shurley on Cotton: Prices Advance on Crop Conditions, Stronger Exports

Green cotton bolls with a few mature. Photo: Seth Byrd

Cotton price (Dec futures) rose just over 2 ½ cents last week. Aided by a big day on Thursday (up over 1 ½ cents), price advanced on crop conditions and uncertainty and a much needed good export report.

Last week’s report for the week ending July 23rd shows net new 2019 crop sales of 131,600 bales including 79,000 bales for Vietnam and 28,600 bales for China. This brings total sales to 18.26 million bales.

Shipments for the week ending July 23rd were a strong 338,500 bales with 111,450 bales to China. Shipments now total 14.68 million bales with one more reporting week remaining in the 2019 crop marketing year.

Shipments will need to be approximately 522,000 bales to reach the USDA projection of 15.2 million bales for the marketing year.

2019 crop year sales carried forward would be approximately 3.1 million bales. New crop 2020 sales currently total 3.7 million bales with 1.26 million to China. USDA currently projects exports to total 15 million bales for the 2020 crop year—down 200,000 bales from the 2019 crop year.

Most areas in Texas-Oklahoma, the Mid-South, and Southeast have received rainfall over the past 7 days although it was little in some areas.

Category 1 Hurricane Hanna came ashore south of Corpus Christi on July 25th bringing high wind and heavy rainfall to open and defoliated cotton in that area. Reports are saying that damage is widespread and heavy in some areas.

Elsewhere, Tropical Storm Isaias is expected to come ashore as a Category 1 hurricane sometime tonight along the northeast South Carolina or southeast North Carolina coastline—sending rain, heavy in some areas, through east GA, SC, NC, and VA. Ironically, Isaias could be beneficial to the cotton crop in some cases while being detrimental in others.

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Today’s USDA crop progress and conditions report shows the US crop has declined to 45% good to excellent from 49% the week before. The Texas crop is 25% good to excellent compared to 31% a week earlier. The crop in the Southeast has also declined.

A drop of 4 points in the US crop is probably not as much as analysts were expecting. The percent of the Texas crop rated poor to very poor was 24%– just 1 point higher than a week earlier and still an improvement compared to 34% poor to very poor 2 weeks ago.

December futures were sharply higher today—closing at just shy of 64 cents. It has been suggested by some that the increase is due to crop concerns. But the USDA numbers today (released after the market closed) may not support such concern.

Tomorrow’s follow through action will set the tone for the market over the next few days and weeks until USDA’s August supply/demand numbers.

A 6-point drop in the Texas crop good to excellent, a 4% drop in the US crop, and a hurricane headed for the Carolinas that could prove detrimental to some, beneficial to others. This newest move to near 65 cents still represents a marketing and risk management opportunity on some portion of expected production.

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