Cotton Market Experiences Rare Harvest Price Spike BY JOHN MILLER
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alley cotton farmers have experienced a lot of change during the growing season. Early on, dry conditions led to a loss of cotton acreage, some of which were switched to grain after crop failures in attempt to keep the land productive.
A significant share of the cotton that completed the growing season made an impressive mid-season improvement that saw per acre yields up to and even exceeding 2 bales per acre on non-irrigated land. In addition to the late season improvement in the cotton crop, prices have experienced an unexpected post-harvest spike to levels not seen very often at any time of year. As you can see from the December Cotton Futures Chart (CTZ21), cotton futures prices exceeded 1 dollar per pound for the first time since the fall of 2011. While there does seem to be a lot of trading resistance at about the $1.05 level, it is too uncertain to say that this market is out of steam. But as you can imagine, futures traders remain extremely cautious since speculators could easily liquidate long positions for taking profit, especially given the longevity of the two weeks long rally.
In addition, the total Open Interest in the cotton futures markets is topping 290,000 contracts, which is the largest figure for this time of year in the last 5 years. So, the uncertainty centers around whether there is enough bullish information to keep the selling off of an overbought market at bay. You can also see from the CTZ21 chart, that in recent weeks the cotton market has continued to rally in the face of an increasing US Dollar which is typically not the case. It is difficult to put percentages on contributing factors in the most recent run-up in cotton futures prices. There seems to be confidence about future demand, especially from China. Speculators may also be tying cotton in with rising energy prices. But there are also numerous short-term concerns primarily related to weather. Heavy rainfall in Texas, Oklahoma, and Arkansas this past week has raised concerns about the cotton crop in those states, especially on the significant about of ‘open’ cotton primed for harvest. While the overall US crop is an unusually high rated 64 percent good-to-excellent, a considerable amount of this cotton is at a vulnerable stage. It seems that the added reports of both China and India experiencing weather issues that have caused some flooding has added anxiety to the marketplace as well. There are reports that heavy rains from Cyclone Gulab having damaged summer crops in India, including cotton, just as harvest is set to begin there.
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Ag Mag THEAGMAG.ORG
As with any market run-up, it us typically a culmination of numerous price-positive
