Plains Cotton Cooperative Association (PCCA) Weekly Cotton Market Report: May 13, 2016

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USDA RELEASES FIRST SUPPLY AND DEMAND ESTIMATES FOR 2016-17

The U.S. Department of Agriculture released its monthly supply and demand estimates on May 10 which contained the first look at figures for the 2016-17 marketing year. Initial market reaction was bearish when the report was released at 11:00 a.m. CDT.

The department forecast U.S. production at 14.80 million bales for the coming season compared to 12.89 million for 2015-16. Domestic consumption was unchanged at 3.60 million bales, and exports were forecast at 10.50 million bales versus 9.00 million currently estimated for 2015-16. Of some concern was 2016-17 U.S. ending stocks of 4.70 million bales, up 700,000 bales from the 2015-16 estimate.

World 2016-17 production was forecast at 104.36 million bales, up 4.81 million, and world consumption was forecast at 110.78 million bales, up 1.75 million. However, world ending stocks at the conclusion of the coming season are forecast at 96.48 million bales, down 6.36 million.

The department also released its final 2015-16 production figures for Texas, Oklahoma and Kansas. Texas farmers harvested 5.72 million bales with 4.69 million coming from the High and Rolling Plains. Oklahoma farmers harvested 374,000 bales, and the Kansas crop totaled 35,000 bales.

Cotton futures prices at the Intercontinental Exchange (ICE) immediately fell after the USDA report was released but managed to recoup some of the losses by the close of trading.

FRIDAY, MAY 6

The marketing week began on a positive note with futures contracts posting positive gains across the board with the exception of the soon-to-expire May contract. The session opened on a strong note, but the ensuing buying and selling kept contracts on both sides of unchanged for a while. The lead month, July, settled at 61.83 cents per pound, up 4 points, and December settled 36 points higher at 61.37 cents.

MONDAY, MAY 9

Weakness in crude oil, precious metals, grains, and a stronger dollar weighed on the cotton market Monday. July cotton traded as low as 61.18 cents before settling in the lower half of an 88-point range at 61.33 cents, down 50 points. December traded in an 80-point range and settled 33 points lower at 61.04 cents.

TUESDAY, MAY 10

Cotton futures worked lower throughout the session, especially after USDA released its monthly report. Contracts managed to move off their lows before the close of trading with July settling at 60.90 cents, down 43 points. December settled at 60.91, down 13 points.

WEDNESDAY, MAY 11

Cotton futures traded mostly sideways and in a narrow range before settling lower for the sixth time in the last seven sessions at ICE. After selling pressure increased, contracts moved to negative ground. July settled 30 points lower at 60.60 cents, and December settled at 60.58, down 33 points.

THURSDAY, MAY 12

Cotton futures settled mixed with July trading on both sides of unchanged. The contract settled 13 points higher at 60.73 cents after falling to a low of 60.55. December cotton settled one point lower at 60.57.

In other news, USDA reported net sales of U.S. upland cotton totaled 103,500 bales in the week ended May 5, up 69 percent from the previous week and 38 percent from the four-week average. Turkey, Brazil and Vietnam were the featured buyers. Export shipments that week totaled 171,100 bales, down 38 percent from the previous week and 25 percent from the four-week average. The primary destinations were China, Turkey, Vietnam, and Mexico.

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