REPRESENTING COTTON GROWERS THROUGHOUT ALABAMA, FLORIDA, GEORGIA, NORTH CAROLINA, SOUTH CAROLINA, AND VIRGINIA
COTTON MARKETING NEWS
Volume 18, No. 13
Sponsored by
Rally Stalls, Market Looking More Uncertain
New crop Dec futures made its run to near 65 cents a couple of
weeks ago. That rally was fueled by US crop conditions/concerns
and strong export shipments. Price has since trended down—
hammered by 2 consecutive down days to close out last week—
down almost 2 ½ cents total on Thursday and Friday.
For the better part of 2 months prior to the rally to near 65, price
was stuck in a range of mostly 57 to 60 cents. With the August
USDA numbers looming (the first survey-based estimates), the
direction this market takes is in the balance. Will 60 cents hold
and give us a foundation for potentially another rally or will price
retreat back to the previous 57-60 rut? At this writing, price has
recovered a bit—back to 61.
Reports suggests the weakness that has developed is due to new
recent political friction between the US and China (that might sour
trade between the 2 countries), improved weather, and export
sales cancellations.
Tensions between the US and China are at a peak. Last week the
Trump administration ordered the Chinese consulate in Houston
closed amid allegations of stealing information. China retaliated
by closing the US consulate in Chengdu. With cotton demand
already weak and a large quantity of sales to China yet to be
shipped, any escalation in diplomatic tensions between the US
and China creates more uncertainty in demand.
For the week ending July 16, export sales were a weak 17,300
bales. Sales cancellations were 19,000 bales. A lot is being made
of these cancellations and the week before as well. Cancellations
are problematic but magnified by weak new sales.
July 27, 2020
As of July 16, with 2 weeks remaining in the 2019 crop marketing
year, there were 1.39 million bales in 2019 crop sales to China yet
to be shipped. New 2020 crop sales to date to China total 1.26
million bales. Escalating tensions between the US and China
threaten both 2020 and remaining 2019 sales and shipments.
For the week ending July 16, shipments to all destinations totaled
281,800 bales—12.5% below the previous week. With 2 reporting
weeks remaining in the 2019 crop year, shipments need to
average 430,000 bales per week or 42% above the pace of the last
2 weeks to meet USDA’s projection of 15.2 million bales for the
marketing year.
Over the past week, the Cotton Belt has received rainfall. Even
most of Texas received at least some precipitation. Category 1
Hurricane Hannah brought wind and rain along the Coastal Bend
area but NASS says that damage reports are not yet available.
Tropical Storm Gonzalo has dissipated and is not a threat.
1
Crop Condition as of July 26 Compared to Previous Week
Poor and Very Poor Good and Excellent
US 16% / 22% 49% / 47%
Texas 23% / 34% 31% / 28%
1/ (July 26 / July 19)
The US crop is currently projected at 17.5 million bales. We have
said in this space previously that a diminished US crop may not be
enough to take us to higher prices. Last week’s activity should be
proof of that. If we are going to make another run at 65 cents or
better, fears and uncertainty over demand and trade must
subside. The US crop may even have to get a little smaller or
production reduced somewhere else in the World. The preferred
combination is a good US crop with much improved demand but
that may be down the road a ways.
Cotton Economist- Retired
Professor Emeritus of Cotton Economics