Cotton Market Weekly(2/04/15)

The U.S. Department of Agriculture released its annual planting intentions estimate Tuesday for the 2015 crop year which showed a 13 percent decline in U.S. cotton acreage compared to last year. U.S. farmers are expected to plant 9.55 million acres of cotton this year, the department said, versus 11.04 million in 2014. The planting estimate for corn was pegged at 89.2 million acres, down 2 percent, wheat acreage was reduced 3 percent at 55.4 million acres, and soybean acres were raised 1 percent to 84.6 million.

USDA’s estimate for cotton was 150,000 acres more than the National Cotton Council’s estimate of 9.40 million announced during the organization’s annual meeting in February. For the 2015 season, USDA estimated Texas farmers will plant 5.715 million acres of upland and pima cotton, down 8 percent from last year. Oklahoma plantings were pegged at 260,000 acres, up 8 percent, and Kansas acreage was estimated at 24,000, down 23 percent from 2014.

Cotton futures at the Intercontinental Exchange (ICE) turned higher Tuesday following the release of USDA’s estimate which was about what most traders expected. Within an hour of the report’s release, buyers returned to the screen and lifted May cotton to a gain of just over 100 points, topping at 63.94 cents per pound. A late-session retreat resulted in May settling at 63.10 cents, up 58 points, and December settled 56 points higher at 64.34 cents per pound. Volume at ICE was estimated at 33,330 contracts, the highest in more than a week.

Overall, cotton futures prices have been trading in a two-sided affair recently. Monday’s ICE session saw cotton trade on either side of unchanged before falling sharply just ahead of the close. May cotton settled at 62.52 cents, down 103 points, and December settled 90 points lower at 63.78. All other contracts posted losses ranging from 67 to 87 points.

Cotton futures pulled back Wednesday and gave up most of the previous session’s gains. May cotton opened lower and was pressured throughout most of the day. Cotton’s retreat was in contrast to strong gains in the grain and oilseed sectors late in the session. May settled at 62.58 cents per pound, down 52 points, and December settled at 63.91, down 43 points. One analyst commented that the cotton market appears to be “fairly comfortable with the current trading pattern.” Traders on Wednesday also seemed to be expecting another solid export sales and shipment report from USDA.

Released early Thursday morning, the report may have been disappointing to some traders and analysts. The department reported net sales of U.S. upland cotton in the week ended March 26 totaled 61,200 bales, down 66 percent from the previous week and 37 percent from the four-week average. Featured buyers were Vietnam, Mexico and Turkey. However, export shipments for the week totaled a healthy 325,300 bales, up 12 percent from the previous week and 4 percent from the four-week average. The primary destinations were China, Vietnam, Turkey, Indonesia, and Mexico.