Cotton prices fell on Tuesday, generally dropping between 70 and 100 points. The condition of the crop improved last week with the share rated in the good or excellent categories up 2 points and the share poor or very poor down 1 point. In addition, rain moved into the Texas High Plains on Tuesday, and the moisture is bound to help the crop. The share of the Texas crop rated in the good or excellent categories was up 2 points from the previous week and is 7 points above the year ago level.
The improving crop conditions both tend to enhance yield potential, but also raise the share of acres that will be harvested. A panel of experts at the Ag Market Network’s Cotton Roundtable said production this year could top 17.5 million bales, a million higher than USDA’s forecast in July. It is little wonder that prices continue to decline.
The October contract settled at 64.44 cents per pound, down 92 points. December was 87 points lower, falling to 65.01. Tuesday’s close was a new low for the December contract.
The break in cotton futures seemed to be at least pausing midweek last week and was overdue for a modest rebound. But it didn’t last and futures broke hard Thursday, restoring the clear downtrend in prices. Monday’s further improvement in crop ratings does nothing to threaten that downtrend.
Both U.S. and global fundamentals remain overwhelmingly bearish in terms of projected ending stocks and some noted observers think USDA may still be 1 million bales too low on its estimate of the U.S. crop. That’s why we advised advancing sales if December could recover to 69. They didn’t. We still see downside risk to the low 60s by harvest.
