Cotton Market Weekly: September 27, 2014


December cotton futures prices at the Intercontinental Exchange (ICE) fell to their lowest level since 2009 at the close of Thursday’s trading session in New York. The contract traded as low as 60.83 cents per pound before buyers returned, enabling it to settle at 61.40 cents, down 17 points. It was the eighth lower settlement for December out of the past 10 sessions, during which time the contract lost 669 points or 6.69 cents per pound.

This week began ominously when China’s National Development and Reform Commission (NDRC) announced Monday that cotton imports will be limited to 4.1 million bales in 2015, the minimum quota required by the World Trade Organization (WTO). At that time, a cotton market newsletter reported the government would accept applications for “additional processing trade quota” if the added-value goods would be exported. However, the same newsletter reported the additional quota was not discussed by NRDC during a teleconference on Thursday. It also reported cotton sales from China’s reserves will resume in March.

The initial news on Monday sent cotton futures tumbling at ICE as selling led December cotton to a 218 point loss before the pressure eased. The contract finally settled 180 points lower at 62.59 cents per pound. Other cotton futures contracts also suffered triple-digit losses.

Buyers were more active throughout most of Tuesday’s ICE session, and December settled 24 points higher at 62.83 cents after trading as high as 63.29. Some support may have come from a weaker dollar; however, cotton returned to its losing ways during Wednesday’s session.

Adding to the market’s bearish sentiment was news from the Cotton Association of India that the crop there could be 1.5 million bales more than USDA’s current estimate. Another report from China indicated the cotton crop in its major producing region could be 15 percent higher than last year’s production. Consequently, December cotton settled 126 points lower at 61.57 cents per pound.

Meanwhile, traders seem to be ignoring the heavy rains that fell in much of West Texas this week. There is little doubt the prolonged wet and cool weather in the region has further delayed the crop’s progress, and yield and quality concerns are increasing. Sun and warmer temperatures were expected to return by the weekend. Better conditions were reported in the northern Delta this week as producers there were able to move forward with preparations for harvest. Further south, harvest was advancing in Mississippi and Louisiana, but rain was expected this weekend.

In other news, net export sales of U.S. upland cotton totaled 155,700 bales in the week ended Sept. 18, according to USDA, up noticeably from the previous week and 68 percent more than the prior four-week average. The featured buyers were China and Vietnam. Export shipments that week totaled 87,900 bales, down 16 percent from the previous week and 10 percent from the four-week average. China, Mexico and Vietnam were the primary destinations.

In the spot market, producers sold 2,375 bales online in the week ended Sept. 25, down from 10,888 bales sold online the previous week. Average prices received ranged from 61 to 64 cents per pound compared to 56 to 69 cents the previous week.