USDA cotton export report shows solid sales

19 Jul '14

2 min read

There was a lot of talk in the market this week about death, dead cat bounces, flat lining, etc. Well, honestly it was a dead market. The range was tight with only a 38 point drop from last Friday’s settle and volumes weren’t very big at all. And it seemed like not much could move the market.

The USDA export report showed solid sales, revealing that mills are very interested in buying at these levels for prompt delivery (if they can find some) as well as for new crop with Sep-Mar deliveries. Trade futures purchases were offset by the specs reducing longs/increasing shorts. It is hard to get a bounce when the ones with the money are selling the futures.

Unfortunately for the producer, they’ve got themselves in a bit of a bind with more and more cotton to sell but prices that don’t appeal. Hope kills and it looks like hoping for the 85 cent range has cost some farmers a ton of money.

So where do we go from here? A lot hangs in the hands of the specs in the short run and the farmers in the medium run. Specs may start to get the picture that the market is oversold given the lack of U.S. old crop that is available, which may cause them to start taking their profits on their shorts.

But they know just as well, or not better, that the trend is their friend. Farmers won’t be left for dead. They will fight for time by using the loan, which could make cotton availability tight for the first few months on the new season, potentially driving up prices. Risk managers may just suggest getting out of December as fast as possible.

ECOMUSA

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