2013-11-06 / Farm & Ranch

Cotton Market Weekly

A Service Provided by Plains Cotton Cooperative Association October 31, 2013

A much anticipated export sales and shipment report from the U.S. Department of Agriculture could not keep cotton futures prices from settling lower for a tenth consecutive session Thursday at the Intercontinental Exchange (ICE). It may have been the first time in 10 years that cotton futures closed lower for 10 consecutive sessions, according to one market analyst.

Due to the partial government shutdown earlier this month, USDA had to “catch up” with its reporting this week. The department reported net upland sales of U.S. cotton totaled 612,300 bales during the three weeks ended October 24. China, Turkey and Indonesia were the featured buyers. Shipments during the period totaled 231,400 bales with China, Mexico and Turkey the primary destinations. The report also showed net sales of 13,300 bales for delivery in the 201415 marketing year.

Most traders and analysts were expecting a sales figure between 300,000 and 500,000 bales, but a few mentioned a range of 700,000 to 800,000 bales. The government report enabled December cotton futures to climb to 79.09 cents per pound, up 125 points, during the hour following its release. However, the upside momentum did not hold, and December cotton settled near its low of 77.11 cents Thursday at 77.18 cents per pound, down 66 points. All other cotton futures contracts also settled in negative territory.

One analyst said, “Cotton was easily the worst performer of all commodities for the month (October), off a baleful 11.5 percent, a fraction over 9 cents.” Traditional technical factors should indicate the cotton market is oversold, but harvest pressure and ideas that the U.S. crop is larger than last projected by USDA have been weighing on the market. USDA’s next supply and demand reports are scheduled to be released Nov. 8.

The negative factors have trumped positive economic numbers recently and reports of unwanted rain in the Delta and Southeast that has interrupted cotton harvest. Thunderstorms in the Delta delivered heavy rains Wednesday evening to parts of Mississippi, Louisiana, and Arkansas with totals exceeding 2.00 inches and isolated flooding in some areas. Rain chances were forecast at 100 percent in the Memphis area through Thursday night. The harvest in Missouri and Tennessee is well behind schedule compared to previous years. The storm system was expected to move into Alabama and Georgia as the weekend approached.

Meanwhile, very light rain was reported near Lubbock Wednesday night; however, it was not expected to have much impact on harvest as clear and sunny conditions were forecast through the weekend. According to the National Agricultural Statistics Service (NASS), 22 percent of the Texas High Plains cotton crop had been harvested as of Oct. 27.

Heavy rainfall and flooding were reported in parts of Central Texas and the Edwards Plateau this week where 60 percent of the crop had been harvested. Overall, 31 percent of the Texas cotton crop had been harvested compared to 40 percent at the same time last year. Farmers in Oklahoma had harvested 21 percent of that state’s crop versus 43 percent a year ago, and 8 percent of the Kansas crop was harvested compared to 24 percent at this time in 2012.

The spot cotton market became more active as producers sold 11,141 bales online in the week ended Oct. 31 compared to 6,905 bales sold the previous week. Average prices received ranged from 77 to 80 cents per pound versus 76 to 81 cents the prior week.

In other news, the China National Cotton Reserve Corporation held a summit meeting Thursday in Beijing presumably to discuss several issues. Timing of the release of cotton from the country’s strategic reserve and future policy initiatives were expected to be on the agenda.

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