2013-01-09 / Farm & Ranch

Cotton Market Weekly

A Service Provided by Plains Cotton Cooperative Association January 3, 2013

In sharp contrast to the way 2012 ended, the New Year is off to a much quieter start for the cotton market. Volatility seemed to be the main feature as the year came to a close, but January began under mostly lackluster conditions.

Cotton futures prices at the Intercontinental Exchange (ICE) retreated Dec. 27 and 28 as the March contract lost a total of more than 2 cents after it had closed at 77.06 cents per pound on Wednesday, its highest level since Sept. 19 when it settled at 77.16 cents per pound. The March contract traded on negative ground the entire session on Dec. 28.

The final day of the year was kinder as March cotton regained almost a half-cent to close at 75.14 cents. The contract was stalled near unchanged at midday until buyers returned and helped it move higher. Following the New Year holiday, cotton futures settled higher Wednesday in an abbreviated trading session. March closed 22 points higher at 75.36 cents, due perhaps to strength in other commodity and stock markets after the U.S. Congress passed legislation to avoid the so-called “fiscal cliff.” At one point during the session, the March contract surged to 76.95 cents before stalling and pulling back.

Thursday’s activity at ICE was featureless, although volume was respectable, according to one analyst. March cotton managed to gain 3 points at the close of trading while other contracts posted small to modest losses. Another analyst noted cotton prices “seem to have found a sweet spot” and may be easily influenced by any buying or selling.

The legislation passed by Congress late Tuesday evening also contained a nine-month extension of the 2008 farm bill. The extension is expected to include existing direct payments to producers, according to one publication, and other current cotton programs.

In other news, export sales of U. S. cotton increased a net 180,600 bales in the week ended Dec. 27, according to the U.S. Department of Agriculture. The volume was down 36 percent from the previous week and 45 percent from the four-week average. The featured buyers were China, Turkey and Vietnam. Export shipments for the same week totaled 182,500 bales, up five percent from the prior week but down one percent from the four-week average. The primary destinations were China, Turkey and Mexico.

Combined sales of U.S. upland and pima cotton year-to-date now total 80 percent of USDA’s forecast for 11.8 million bales. However, export shipments total only 30 percent of the forecast. For the remainder of the marketing year, weekly shipments will need to average 260,000 bales.

The transition from 2012 to 2013 and a shortened trading period seemed to keep a lid on spot market sales of cotton. Producers in Texas, Oklahoma, Kansas, and New Mexico sold 22,845 bales online in the week ended Jan. 3 compared to more than 42,000 the previous week. Average prices received by producers ranged from 63 to 68 cents per pound compared to 67 to 70 cents the previous week.

Meanwhile, portions of the U.S. Cotton Belt continue to benefit from light precipitation while the Texas High and Rolling Plains remain mostly dry. Light rain was reported in the Texas Coastal Bend and Lower Rio Grande Valley this week, and a 20 percent chance of rain was forecast in the Mid-South this weekend. Parts of Alabama and central Georgia also saw improvement in their drought conditions.

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