Dec13 cotton fell through support at the 84 to 85-cent level last week.
Prices fell 2 cents on Wednesday to 83.42 and continued at that low level the remainder of the week — closing Friday at 83.58, down 1.59 cents for the week.
Prices attempted a recovery Monday and moved back above 84 cents. If a recovery fails, the next level of support appears to be at 82 cents.
Having broken previous support at the 85-cent area, there will be more “traffic” to negotiate if we expect another shot at the 90-cent area. Not saying it can’t happen — it just becomes a little tougher to do.
Weather factors. We know that U.S. cotton acreage and production will be down this year. Recent reports are that the Texas Lower Rio Grande Valley crop will be cut significantly this year due not only to acreage shifts to other crops, but also reduced yield prospects due to lack of rain and irrigation water.
The cotton in this area is among the first typically harvested in the U.S. A shortage of early crop could increase the demand for early Southeast cotton.
Despite the market meltdown over the past month, I expect weather to continue to be a factor in price direction and should provide support unless offset by demand-side and other supply factors.
Exports. The most recent export data shows upland cotton sales up 13 percent from the previous week but shipments down 15 percent.
The top buyer was China with purchases of 178,400 bales (running bales) of the 2012 crop and 23,100 bales of the 2013 crop.
Actual shipments included 170,200 running bales to China, and 59,900 bales to Turkey.
Crop progress. Last week’s Crop Progress report showed the cotton crop 10 percent planted compared to 14 percent on average and 17 percent last year.
Texas planting last week was at 5 percentage points behind normal.
In the Southeast, Alabama was 9 percent planted, Georgia at 3 percent, North Carolina at 8 percent, and South Carolina at 7 percent.
Georgia and Virginia were behind normal. Alabama, North Carolina, and South Carolina were ahead or normal.
Market analysis. The move to 83 cents last week, triggered by the big blow on Wednesday, has added a dose of reality to this market. The recovery being attempted Monday and this week, will set yet another important tone.
Prices are determined by 2 forces — those that want/think prices should go up and those that want/think prices should go down.
When the “down forces” seem to have the upper hand, the “up forces” have to eventually assert themselves to stop the downtrend. Will that happen this week?
We’d all like another shot at 90 cents and we may still get it, but last week’s collapse might be a wakeup call. Is 90-cent cotton sustainable when we have record global supplies and increasing U.S. and global economic uncertainties?
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