2015-05-13 / Farm & Ranch

Cotton Market Weekly

A Service Provided by Plains Cotton Cooperative Association May 8, 2015

Cotton futures tumbled as the month of May began last Friday. July cotton started slowly and was trading near unchanged until selling pressure emerged, forcing the contract as low as 65.72 cents per pound. It ended the session in the bottom half of a 241-point range, settling at 66.61 cents, down 127 points. December cotton moved slightly higher in early trading, going as high as 66.99 cents until it, too, met resistance and settled 19 points lower at 66.45 cents per pound.

The move lower continued as this week began with July trading in negative territory for most of Monday's session at the Intercontinental Exchange (ICE). Before the close of trading, modest buying emerged and lifted the July and December contracts back to the top end of their trading ranges. July cotton settled at 66.67 cents per pound, up 6 points, and December settled 21 points higher at 66.66 cents. At that point, it appeared the market was entering a consolidation phase.

Futures settled mixed Tuesday with selling pressure heaviest on the December contract. July cotton traded lower most of the session but worked its way back near the top end of an 82-point range, settling 8 points higher at 66.75 cents. Reports of heavy rain on the Texas High Plains weighed most on December cotton as soil moisture levels improved dra- matically just ahead of the region's prime planting period. The contract settled at 66.49 cents, down 17 points, but other forward months settled with modest gains.

In addition to the rain in West Texas, traders also were talking about a private U.S. crop estimate that pegged the 2015-16 U.S. crop at just under 13.5 million bales. By comparison, at the Ag Outlook Forum in February, USDA was estimating the U.S. crop at 14.0 million bales.

The next monthly supply and demand report from USDA will be released on May 12, and it will provide the first look at this year's production.

The impact of the favorable rain in West Texas carried over to Wednesday's ICE session. July cotton never traded above unchanged and settled 89 points lower at 65.86 cents, its lowest settlement in almost two weeks. December cotton settled 72 points lower at 65.77 cents per pound. Talk among the trade Wednesday was focused on the potential for limited abandonment in West Texas this year following the timely, beneficial rainfall. The average three-year abandonment rate is approximately 35 percent, according to one analyst.

A disappointing export report and a stronger dollar added to the pressure on cotton futures Thursday. July settled 33 points lower at 65.53 cents per pound, and December settled 34 points lower at 65.43 cents.

Released early Thursday morning, USDA's export sales and shipment report showed net sales of U.S. upland cotton totaled only 19,800 bales in the week ended April 30, down 84 percent from the previous week and 73 percent from the four-week average. Featured buyers were South Korea, Turkey and Thailand. The report also contained sales cancellations from 10 foreign markets. Net sales of 13,600 bales for delivery in the 2015-16 marketing year also were reported. The report's bright spot was export shipments which totaled 412,500 bales for the week, up 45 percent from the previous week and 33 percent from the four-week average. The primary destinations were China, Vietnam, Turkey, South Korea, and Indonesia.

Another USDA report this week showed 17 percent of anticipated U.S. cotton acreage had been planted as of May 3 compared to the five-year average of 22 percent. Texas producers had planted 13 percent of their acreage versus the five-year average of 20 percent. Oklahoma and Kansas producers had planted 6 percent and 2 percent of their acres, respectively.

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