2015-08-26 / Farm & Ranch

A Service Provided by Plains Cotton Cooperative Association

August 21, 2015

Cotton futures at the Intercontinental Exchange (ICE) in New York settled higher five consecutive sessions before taking a breather on Wednesday. The bullish trend began Aug. 12 following the release of USDA's monthly supply and demand reports which contained a dramatic cut in projected U.S. cotton production that shocked many traders and analysts.

The wave of buying continued to push futures contracts higher Monday as December cotton traded as high as 66.89 cents per pound before pulling back to the top half of a 122-point range. The contract settled at 66.52 cents, up 57 points. Monday's action also may have been boosted by the latest CFTC report the showed heavy speculative selling into the recent lows last week, according to one analyst.

Tuesday's ICE session was quieter as cotton futures spent time consolidating. Other than October cotton, which settled 5 points lower, all other contracts posted modest gains. December settled 11 points higher at 66.63 cents per pound. Traders continued to discuss the Texas production outlook and were expecting USDA to adjust its estimates for the state in the September supply and demand reports. Last week's reports noted higher-than-expected abandonment rates and lower yield expectations for Texas' cotton crop.

The bulls lost some of their grip on the cotton market Wednesday as futures traded in a narrow consolidation range. December cotton settled 10 points lower at 66.53 cents per pound after trading in a narrow 97 point range. During its five-day bull run, the contract had gained 471 points.

Cotton futures returned to the plus side of the chart Thursday after starting the day around unchanged and moving lower before buyers returned to the screen. December cotton then moved as high as 66.99 cents per pound and settled at 66.93, up 40 points. Traders were beginning to anticipate the next CFTC Commitment of Traders report to see if it would show the cotton market is becoming overbought.

According to the latest Crop Progress report from USDA, the U.S. cotton crop condition remains steady with 55 percent rated good to excellent. In Texas, 46 percent was rated good to excellent. Oklahoma's crop was rated 77 percent in the good to excellent categories, and 63 percent of Kansas' crop was ranked in those categories.

The latest export sales and shipments report from USDA showed net sales of U.S. upland cotton totaled 52,800 bales in the week ended Aug. 13. Turkey, Mexico, Costa Rica, and Vietnam were the top four buyers. The department also reported export shipments for the week totaled 110,600 bales, and the primary destinations were Vietnam, Mexico, Turkey, and South Korea.

In other news, the Cotton Corporation of India continues to sell cotton from its reserve stocks at a good pace. Sales on Wednesday totaled approximately 161,500 bales compared to 159,400 bales sold the previous day. According to one market observer, India sales to-date totaled just over 5.0 million bales from the reserve as of Aug. 20. It is a different story in China where daily sales from its cotton reserves have been falling well short of the goals.

Showers and thunderstorms moved through South Texas Thursday, bringing heavy precipitation to some areas of the Coastal Bend. The National Weather Service also reported more than 2.00 inches of rain fell in the Harlingen area of the Lower Rio Grande Valley where farmers had been defoliating and harvesting. More than 3.00 inches of rain was reported in the Houston area, and some areas of Central Texas were expecting scattered showers.

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