Cotton Market Weekly (29/05/2015)

Cotton futures surged higher Thursday at the Intercontinental Exchange (ICE) with July, the lead month, holding near the top of its trading range late in the session. After trading as high as 64.54 cents per pound, the contract settled 128 points higher at 64.33 cents. December cotton also posted a triple- digit gain at the close of trading, settling at 65.06 cents, up 103 points. A weaker dollar may have provided the stimulus for cotton along with corn and wheat futures. Other supportive factors noted by one market newsletter included speculative fund activity and continued rainfall in Texas.

Following Monday’s market holiday, cotton futures traded under modest pressure Tuesday, a continuation of the previous week’s five-day decline in prices as the dollar managed to maintain some strength. The only contract that settled with a plus sign after it was July which gained one point to settle at 63.31 cents per pound. December settled at 64.08 cents, down 30 points, and all other months posted similarly modest losses.

Market weakness continued Wednesday at ICE as cotton futures traded in fairly narrow ranges and settled modestly lower as traders seemed focused on speculative selling and the upcoming index rolls. July cotton traded in an 86-point range and settled at 63.05 cents per pound, down 26 points. December settled 5 points lower at 64.03 cents. Traders and analysts also were talking about delayed cotton planting in West Texas due to wet conditions.

USDA’s Crop Progress Report for the period ending May 24 showed Texas cotton farmers had planted only 29 percent of their anticipated acreage, well behind the five-year average of 50 percent. West Texas farmers have been restricted to planting during brief periods of dry, clear weather conditions between frequent storms that have dumped heavy amounts of rain across much of the region. Impending crop insurance planting deadlines are causing some uncertainty about what farmers will eventually do regarding cotton acreage.

Elsewhere, flooding was reported on some planted fields in the Mississippi Delta and Louisiana at mid- week, and additional rain was in the forecast in the coming days. Some of the cotton acreage may have to be replanted due to standing water in many fields. In Arkansas, planting was almost complete, and Missouri and Tennessee were just over 70 percent planted with normal germination reported on early planted fields.

The latest export report from USDA showed net sales of U.S. upland cotton totaled 117,500 bales in the week ended May 21, up 98 percent from the previous week and 86 percent from the four-week average. The featured buyers were Vietnam, Turkey and Hong Kong. Net sales for delivery in the 2015-16 marketing year totaled 57,300 bales, and the featured buyers were Vietnam, Turkey and Guatemala. The department also reported export shipments of 339,200 bales during the week, down slightly from the previous week but up 6 percent from the four-week average. Primary destinations were China, Vietnam, Turkey, Indonesia, and South Korea.