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Cotton Marketing News

The cotton market has rebounded 13% from summer lows near 58 cents per pound but has recently stalled around 66 cents. Prices are supported in the 62-63 cent range but face resistance at 65-66 cents. For prices to strengthen further, US-China trade talks need concrete progress and exports and demand need to improve. Growers could consider pricing remaining crops against targets like 65-66 or 68 cents to limit risk while higher prices are possible if demand increases. The basis in the Southeast has weakened from strong positive levels previously.

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Brittany Etheridge
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58 views

Cotton Marketing News

The cotton market has rebounded 13% from summer lows near 58 cents per pound but has recently stalled around 66 cents. Prices are supported in the 62-63 cent range but face resistance at 65-66 cents. For prices to strengthen further, US-China trade talks need concrete progress and exports and demand need to improve. Growers could consider pricing remaining crops against targets like 65-66 or 68 cents to limit risk while higher prices are possible if demand increases. The basis in the Southeast has weakened from strong positive levels previously.

Uploaded by

Brittany Etheridge
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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REPRESENTING COTTON GROWERS THROUGHOUT ALABAMA, FLORIDA, GEORGIA, NORTH CAROLINA, SOUTH CAROLINA, AND VIRGINIA

COTTON MARKETING NEWS


Volume 17, No. 17 November 5, 2019

 Still some lingering uncertainty about the size of the US crop.


Sponsored by  Exports sales reports have had some good weeks—but also
some not so good weeks
 World demand has been adjusted downward by USDA but
Cotton Showing More Positive Patterns the monthly revision much less in USDA’s October report.
 The Southern Hemisphere crop is reduced.
Since the summer lows around the 58-cent level, cotton prices
(Dec19 futures) have managed to fight through all the Can the price rebound be sustained?
negatives and unknowns and trended back up—to the 65-66  US-China trade talks need a good and firm positive step
cents area. Price gained about 13% over this time. forward. Prices have proved willing to move on good
rumors. Concrete action is needed before prices will take
The move to close near 66 cents was the highest that prices the next leap up.
have settled since early July. Dec19 now stands at just under  Exports need to be more consistently good
64 cents. The recent uptrend has “stalled” over the past week  Demand is still relatively weak. Need stronger demand.
or so. This has established a clear resistance or ceiling between  Old crop prices may eventually strengthen on the coat tails
65 and 66 cents. Likewise, there now appears a floor or area of needing new crop price to increase to attract acres for
of support at 62 to 63 then lower at 60. 2020. It’s much too early to know how this will play out. One
thing seems obvious, unless demand improves and the US-
China trade war is settled satisfactorily, we likely won’t need
another relatively big US crop next year.

Prices could strengthen further although the recent


“softening” is a concern. Prices have support at 62 to 63
and lower at 60 and even lower at 58 to 59. We don’t want to
go there again but we can’t forget where we have been.

One strategy would be to set targets and then price a


portion of remaining crop when that target is achieved.

What are these targets? Well, the 65 to 66-cent area has


already proven itself a target. Above that, 68. If we can
manage to break 68, then that will likely really open things up
for 70 or better.
You might say, ok Don, why are you telling us all this technical
voodoo stuff? Here’s why—because I want you to begin to But it’s probably not prudent to hold all your cards and
think about where this market has been and where it might go wait on the advent of 70 cents. Set targets to limit risk
in the future and begin to think about what might be and scale up pricing.
considered good remaining market opportunities and the risk
in prices. And, believe it or not, these patterns in the market In closing, the days of a strong positive basis in the Southeast
mean something for a lot of reasons (both good and not so appear over. The market is still very much paying for quality
good) and need to be paid attention to. but the overall price is still lower due to the weaker starting
basis for 41-4/34. Currently, the basis is +1/2 cent (50 points)
The uptrend is welcomed although prices have softened more for 41-4/34 and +2.75 cents (275 points) for 31-3/35 or a 2.25
recently. It’s worth asking—why the recovery/uptrend cents premium for the 31-3/35.
happened, what’s happened more recently, and are these
better prices sustainable? Cotton Economist- Retired
Professor Emeritus of Cotton Economics
Why have prices improved?
 A market “correction” was due—price had moved too low.
 Increased optimism on the US-China trade front.

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