Cleveland on Cotton: Not a Pretty Market, but Prices Strengthening

    Cotton bloom. Photo: Debra L Ferguson

    Triple digit gains for cotton and double-digit gains for grains/oilseeds to end the week.

    Cotton and other row crop commodities did the roller coaster thing again this week, with cotton again ending near where it began the week at 95-97 cents. The volatility continued as the market even tried a run down to 85 cents before recovering. The price movement was very volatile.

    But again, prices came back to the mid-90s – the staging area for its attempt to return to the Dollar Cotton Club, then challenge the stiff resistance in the 102-103 cent area and, all the time, attempting to build a real challenge of the 110-cent level.

    Nevertheless, the bears have not shown themselves ready to give up. Thus, expect price activity to remain very volatile as funds continue to wear the bear hat. Prices should back and fill but with an upward bias. It is not a pretty market, but it is a very active trading market and fundamentals will again rule.

    Market news is beset with demand failure, and there is real concern regarding demand as big box retailers have posted some amazing sales for apparel goods. Yet, goods appear to be moving off the retail shelf with ease, and customers complain about not being able to obtain assistance from store clerks – i.e., the ongoing labor crisis. Thus, labor woes continue and likely will for at least into the first quarter of 2023.

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    Retailers are also attempting to work off the inventory of goods that have just been unloaded from boats that had been stuck at Pacific ports for three to five months. Consequently, retailers must continue to discount, as many of the goods being placed on the shelves are somewhat out of season due to the shipping problem.

    The Mississippi Boll Weevil Corporation just completed its annual meeting and growers were optimistic with their outlook for 2022 production. Most of the state received excellent rains over the past two weeks, and growers discussed how well the crop was fruiting: “loaded.”

    The earlier dry weather pushed the tap root deep into the subsoil moisture, and the recent rains fed the excellent plant development. The Mid-South crop does face some dryness on the dryland cotton in West Tennessee, but most of the region had a very productive week.

    The Texas situation continues to draw most of the conversation as USDA will release its July supply demand report on July 12. Many expect to see Texas abandonment skyrocket. USDA has that call, and it may be a month too early to get too obsessed with abandonment. Nevertheless, expect USDA to reduce its estimate of U.S. production, world production, world consumption, and the all-important level of U.S. carryover stocks.

    U.S. stocks are currently estimated at an abnormally low 2.9 million bales. The July report is expected to drop carryover to as low as 2.5 million bales. Such a reduction would likely be the fuel feeding cotton’s shot at jumping back to the dollar level.

    However, the crop estimates will be subjective estimates compiled by USDA professionals as of July 1 and not objective field estimates. World stocks are also expected to be slightly lower. The report will be discussed on the Ag Market Network Teleconference at 1:30 p.m. Central time following the report’s release. Here are the program details.

    U.S export sales continue extremely strong and serve as a proxy for demand. The strength of sales suggest cotton demand is holding reasonably strong. Additionally, while mills complained with prices were in the high 1.30s-1.40s, some are suggesting mills will easily tolerate prices into the 1.20s.

    Export sales of upland for 2022-23 totaled 381,900 bales on the week as Pakistan, Turkey, Bangladesh, Vietnam, and China were the primary buyers. U.S. export sales for the current week all but confirm that the USDA export estimate of 14.75 million bales will be met and probably slightly exceeded. Again, demand has been surprisingly strong given the difficult economic situation.

    Expect a bullish to neutral USDA supply demand report. The market will give growers a second chance. It always does.

    Feed the market. It is hungry for cotton.

    Give a gift of cotton today.

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