2015-02-11 / Farm & Ranch

Cotton Market Weekly

A Service Provided by Plains Cotton Cooperative Association February 6, 2015

Heavy trading volume at the Intercontinental Exchange ( ICE), continued strong export sales, and surging spot market sales by producers were among the major features in the cotton market this week.

Through Thursday, more than 211,000 futures contracts had been traded at ICE, according to one analyst, and futures settled higher three out of the four sessions. March cotton moved above 60 cents on Monday for the first time since Jan. 15 then pulled back slightly to settle at 59.89 cents per pound, up 53 points. May settled 25 points higher at 60.27 cents, but December cotton, the only loser, settled 12 points lower at 62.67 cents per pound.

Nearby futures contracts surged to triple-digit gains on short covering and buy stops at the close of Tuesday's session. Cotton also found support from a "broad wave" of commodity strength. March settled at 61.45 cents, up 156 points, and May cotton also was up 156 at 61.83 cents per pound. December settled 78 points higher at 63.45 cents. Chinese cotton futures also were higher Tuesday, and prices in India remained firm.

All contracts eased back and posted modest losses at the close of Wednesday's ICE session. Prices traded on either side of unchanged during much of the active trading period. March cotton settled 22 points lower at 61.23, May was down 41 points at 61.42, and December settled at 63.29 cents, down 16 points. One analyst noted prices spent the day consolidating in the upper portion of Tuesday's gains.

Futures returned to positive ground Thursday following the release of a better than expected export sales report. March settled at 61.79 cents, up 56 points, May was up 38 points at 61.80 cents per pound, and December settled at 63.52, up 23 points.

USDA reported net sales of U.S. upland cotton in the week ended Jan. 29 totaled 422,800 bales, down 23 percent from the previous week but up 5 percent from the four-week average. Vietnam was the featured buyer at 162,600 bales followed closely by China with purchases of 146,500 bales. South Korea rounded out the top three with purchases totaling 55,700 bales.

Export shipments for the week totaled 281,700 bales, a marketing year high and up 3 percent from the previous week and 21 percent from the four-week average. Primary destinations were China, Vietnam and Turkey. According to one observer, weekly U. S. export sales need to average only 44,235 bales to reach USDA's current estimate of 10 million, and shipments only need to average 235,000 bales per week. The recent robust sales volume has many traders and analysts talking about USDA increasing its export estimate when the next balance sheets are released on Feb. 10.

An increasing adjusted world price (AWP) calculated by USDA and the resulting decline in the Loan Deficiency Payment (LDP) seemed to keep the fire going under the spot market this week. Producers sold 163,137 bales online in the week ended Feb. 5, up from 139,803 bales the previous week. Average prices received ranged from 52 to 56 cents per pound compared to 52 to 55 cents the previous week.

In other news, the International Cotton Advisory Committee ( TCAC) this week estimated world cotton acreage for the 2015-16 marketing year will decline 6 percent due to the persistent low cotton prices. The committe also projected a 6 percent decline in production, the lowest since 2009- 10, and noted world consumption could exceed production in the coming season.

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