Cotton prices: The Bulls Raring To Go But Stuck In The corral

Jun 15, 2015

By Don Shurley

Cotton growers optimistically wait for cotton prices to break to the upside. Patience is wearing thin. There are factors in play that are potentially “bullish” that could take cotton prices higher. However, these things have not budged the market. New crop cotton prices have remained stuck in the same narrow 4- to 5-cent range for the past eight months.

June 10 USDA cotton production and supply/demand numbers were thought to possibly begin to reflect some of these issues but such is not the case. Based strictly on current news and what may eventually play out or not, I believe price direction could likely be determined within the next month.

The first USDA estimates of actual acreage planted will be released June 30, and the July production and supply/demand numbers will again be an opportunity to make any downward revisions if there are to be any. In the meantime, producers can only be patient and wait it out or, if patience is wearing thin and the risk getting too much, be prepared to hedge a portion of the crop using Puts or by contracting.

USDA numbers leave the 2015 crop estimate and all US numbers the same as in the May report—9.55 million acres planted, 8.6 million harvested, yield of 809, projected exports at 10.7 million bales, and beginning stocks and ending stocks both at 4.4 million.

It has been widely anticipated that actual acreage planted could be less than 9.55 million this year and that projected exports from the 2014 crop year would increase and thus drop 2015 crop year beginning stocks perhaps below 4 million bales. So, we will have to wait until the acreage numbers come out June 30 and then the July 10 supply/demand report to see if revisions will be made then. Here’s an important point—acreage could end up less but yield better than currently estimated. So, there’s a chance the crop could still be on par with or even higher than the current estimate of 14.5 million bales.

In terms of foreign numbers, the USDA report also made little to no change for the 2015 crop year. China is still pegged at 27 million bales—down 3 million bales from last year. China’s expected imports and Use were also unchanged from the May report.

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