PCCA Plains Cotton Cooperative Association : Cotton Market Weekly

January 15, 2016

Macroeconomics Weigh on Cotton Market, USDA Lowers Production Estimate

March cotton futures settled higher three consecutive days in the marketing week ended Jan. 14; however, macroeconomic issues including falling stock markets in China and the United States and falling oil prices continue to keep a lid on cotton prices. Even a 2-million-bale cut in USDA's estimate for world cotton production had only a minor impact on futures prices Tuesday.

Jan. 8

March cotton was unable to find any consistent direction last Friday, trading on either side of unchanged throughout the session at the Intercontinental Exchange (ICE). The lead month ultimately settled 3 points lower at 61.40 cents per pound, and all other contracts settled with single-digit losses.

Jan. 11

The March contract managed to trade up to 62.28 cents Monday in another two-sided affair at ICE. After reaching the session high, persistent selling returned and sent futures lower with March dropping to 61.15 cents before settling 10 points higher at 61.50 cents. All other contracts settled on negative ground.

Jan. 12

March traded higher Tuesday morning ahead of USDA's monthly supply and demand reports released at 12:00 p.m. EST. Although changes to the department's balance sheets were fundamentally supportive, cotton futures settled only modestly higher. March cotton gained 9 points to settle at 61.59 cents per pound.

USDA reduced its estimate for 2015-16 world cotton production by 2.15 million bales compared to last month's report. The U.S. crop was reduced 90,000 bales, and China's and India's production was lowered 500,000 bales, each. World consumption was reduced 450,000 bales compared to last month; however, the net result was a 1.53-million-bale cut in world ending stocks.

Texas cotton production was lowered 50,000 bales to 5.75 million. On the other hand, Oklahoma's estimate was raised 20,000 bales to 370,000, and the Kansas crop was raised 3,000 bales to 27,000.

Jan. 13

March cotton traded higher all day Wednesday at ICE despite light selling pressure. The contract eventually settled at 62.14 cents, up 55 points. Other futures contracts also settled with moderate gains.

Jan. 14

Improved export sales of U.S. cotton failed to boost futures prices Thursday as some traders expected even better numbers. March cotton traded in a two-sided manner during the ICE session and settled 24 points lower at 61.90 cents per pound. Other futures contracts settled with slightly higher losses.

USDA reported net export sales of U.S. upland cotton totaled 171,000 bales in the week ended Jan. 7, up noticeably from the previous week and 68 percent from the four-week average. The featured buyers were Vietnam, Turkey, Indonesia, and China. Export shipments for the week totaled a disappointing 79,400 bales with the primary destinations being Turkey, Indonesia, and Vietnam.

The spot cotton market surged this week as producers sold 79,629 bales online compared to the previous week's online sales of 12,166 bales. Average prices received by producers ranged from 56 to 57 cents per pound in the week ended Jan. 14.