Cotton Market Weekly 10/13/17

From Plains Cotton Cooperative Association

Market Quiet Ahead of Monthly USDA Report

The cotton market was mostly featureless and quiet this week as traders moved to the sidelines ahead of USDA’s monthly World Agricultural Supply and Demand Estimates (WASDE) released on Thursday, Oct. 12. The only notable exception was concern about possible crop damage from Hurricane Nate that made landfall last weekend near the mouth of the Mississippi River.

The Hurricane quickly moved inland and missed major cotton growing regions in southern Georgia and the Delta, although it brought heavy rain and flash flooding to parts of southern Alabama, the Florida Panhandle, northern Georgia and the western Carolinas. Early reports indicated crop damage was not serious. Traders also noted several days of much cooler temperatures on the Texas High Plains this week, but there was little impact on market conditions as futures prices remained in a narrow trading range.

WASDE Report

Thursday’s much-anticipated USDA report was mostly a non-event. Although the department reduced U.S. production by 640,000 bales to 21.12 million, it was mostly offset by lower U.S. exports and higher world production. USDA reduced its export estimate by 400,000 bales to 14.50 million. U.S. consumption was unchanged at 3.35 million bales, and ending stocks were reduced 200,000 bales to 5.8 million. The production estimate was met with skepticism from some analysts who believe the figure does not accurately account for crop damage from Hurricanes Harvey and Irma. The report also raised concerns about growing world stocks outside China.

USDA pegged the Texas crop at 9.0 million bales, down 300,000 from last month’s estimate. The Oklahoma crop was unchanged at 980,000 bales, but the Kansas crop was reduced 15,000 bales to 190,000.

World cotton output was raised 110,000 bales to 120.86 million, but world consumption was raised 260,000 to 118.01 million bales. For the first time since 2014, production is higher than consumption. Nevertheless, world ending stocks declined 160,000 bales to 92.38 million. China’s production, domestic use and ending stocks were unchanged. India’s production and domestic use were unchanged, however, beginning stocks were raised 80,000 bales, and exports were raised 400,000 bales.

U.S. Crop Conditions Improve

After four consecutive weeks of decline in U.S. crop conditions, 60 percent of the crop was rated good or excellent in the week ended Oct. 8, according to USDA’s Crop Progress and Conditions report. In Texas, 56 percent of the crop was rated in the top two categories, and 90 percent of Oklahoma cotton was good or excellent. In Kansas, 68 percent was good or excellent. USDA also reported 25 percent of the U.S. crop has been harvested versus the five-year average of 19 percent. Texas farmers had harvested 27 percent of the state’s crop compared to the average of 19 percent, the Oklahoma harvest was on par with the five-year average, and Kansas was slightly ahead of average.

Export Sales Mostly Steady

USDA also reported export sales of U.S. cotton totaled a net 154,400 bales in the week ended Oct. 5. The featured buyers were Indonesia, Vietnam, China and Turkey. Export shipments have slowed as old-crop inventories have declined and totaled 118,000 bales for the week. The top four destinations were Vietnam, China, Indonesia and Mexico.

In the week ahead:

• The Crop Progress Report will be released Monday at 3:00 p.m. CDT
• The Export Sales Report will be released Thursday at 7:30 a.m. CDT
• The CFTC Cotton On-Call Report will be released Thursday at 2:30 p.m. CDT
• The CFTC Commitments-of-Traders Report will be released Friday at 2:30 p.m. CDT

Friday, Oct. 6

Cotton futures at the Intercontinental Exchange (ICE) posted moderate gains to start the marketing week as Hurricane Nate was bearing down on the U.S. Gulf Coast. December cotton found some strength in early trading, but a flurry of selling dropped the contract lower. Buyers then returned and lifted it back to positive ground. December settled at 68.84 cents per pound, up 57 points, and March settled at 68.29, up 61 points.

Monday, Oct. 9

Cotton futures were weak in early trading but rallied into the close of trading to end slightly higher. Nearby contracts opened lower and fell further before finding support. They then traded in a sideways pattern, before buying pushed them back to positive ground. December cotton settled 11 points higher at 68.95 cents, and March settled 13 points higher at 68.42.

Tuesday, Oct. 10

Dull market conditions continued, and futures contracts traded on both sides of unchanged. Contracts moved to their lows when pressure increased, but support emerged to halt the losses. December settled 22 points lower at 68.73 cents, and March settled 8 points lower at 68.30.

Thursday, Oct. 12

Cotton futures opened on a positive note but quickly fell following the release of the WASDE report as selling pressure increased. A bit of support came at the bottom, but contracts were unable to climb back to positive ground. December settled at 67.84 cents, down 89 points, and March settled 93 points lower at 67.37 cents.

The information contained herein is provided by Plains Cotton Cooperative Association (PCCA), a farmer-owned cotton marketing cooperative headquartered in Lubbock, Texas. It is for general informational purposes only and is obtained from sources believed to be reliable; however its accuracy and completeness is not guaranteed by PCCA, and PCCA offers no representations or warranties of any kind in providing this information. Nothing contained herein is intended, or should be construed, as advice or guidance for the marketing of cotton.