2018-05-16 / Farm & Ranch

COTTON MARKET WEEKLY

Export sales report provides picture of healthy demand

May 11, 2018

July futures started the week with a bang, extending Friday’s rally to a new life-of-contract high at 88.08 cents per pound. Nevertheless, prices began to fall back by mid-morning on Monday, trending lower for the rest of the week. Thursday’s closing price of 84.56 was just 0.06 above the previous Thursday’s close at 84.50. December futures followed July up on Monday, marking a new life-of-contract high at 81.50 cents. However, December held onto more of its gains over the rest of the week. At Thursday’s settlement of 80.11, December was up 0.52 week-over-week. Planting Progress Continues

Monday’s Crop Progress Report showed significant advances in planting. By May 6th, producers had caught up to their average pace with 20 percent of acreage planted across the Cotton Belt. Ten of the 15 states on the report made double-digit advances, and seven are now ahead of average pace versus only two last week. Weather was conducive to further advances this week, which has relieved lingering concerns about a good start in the Delta and Southeast. Healthy Demand in Export Sales Report

Thursday’s Export Sales Report continued to provide a picture of healthy demand. 421,700 Upland bales were sold into the export market, with 193,100 for delivery this marketing year and 228,600 for next. Vietnam was the big buyer of current crop at 89,800 bales, but China (despite the threatened 25 percent tariff) ordered 88,800 bales for next season. Additionally, 510,500 bales were shipped, countering concerns that shipping capacity would prevent final U.S. exports from reaching the USDA’s U.S. export forecast.

Excellent shipments backing up excellent sales freed the USDA to lift its 2017/18 U.S. export estimate by 500,000 bales to 15.5 million on Thursday’s WASDE report. U.S. 2017/18 production decreased by 107,000 bales, which contributed to a decrease of 600,000 in U.S. ending stocks. Ending Stocks on July 31st are expected to be total 4.7 million bales. The May revisions seem to have been just what the market expected, as there was little reaction.

The May WASDE report also revealed the USDA’s first detailed figures for the 2018/19 season. The department’s analysts forecast

U.S. production at 19.5 million bales, lower than last year based on higher abandonment and lower yield in the Southwest due to drought. They also guessed U.S. exports at 15.5 million bales, matching this season. With slightly higher consumption at 3.4 million bales, ending stocks next season are expected to be 5.2 million bales, making next year’s balance sheet remarkably similar to the current one. Focus on Next Crop Progress Report

This week’s WASDE report gave traders and analysts a decent baseline from which to make adjustments going forward. In the week ahead, the Crop Progress Report and newest weather forecasts will be central points of focus. Traders will also be watching for any sign of change in certificated stock (bales made ready for delivery against the futures contract) as merchants decide whether to deliver cotton against futures or to carry it forward into December’s lower prices. As always, the weekly Export Sales Report will indicate what level of demand existed with July futures above 84.00 cents.

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