Plains Cotton Cooperative Association (PCCA) Weekly Cotton Market Report: May 27, 2016

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COTTON FUTURES RALLY, EXPORT SALES AND SHIPMENTS STRONG

This was a good week for the bulls in the cotton market as cotton futures at the Intercontinental Exchange (ICE) put on an impressive performance. Although July cotton had its ups and downs, the contract gained 326 points in the marketing week ended May 26, and December gained 308 points. Several factors were supportive including a strong export report.

The U.S. Department of Agriculture reported net sales of U.S. upland cotton totaled 128,500 bales in the week ended May 19. Vietnam, China and Turkey were the featured buyers. The department also reported net sales of 119,200 bales for delivery in the 2016-17 marketing year, and Mexico, South Korea, Turkey, and Pakistan were the featured buyers. Export shipments for the week totaled 236,500 bales. The primary destinations were Vietnam, Turkey, China, and Mexico.

Export sales for the 2015-16 marketing year now total 8,995,104 bales, and with 10 weeks remaining, sales only need to average about 490 bales per week to reach USDA’s estimate of 9.0 million bales. Year-to-date shipments now total 6,999,792 bales, thus weekly shipments need to average 200,021 bales.

FRIDAY, MAY 20

The marketing week began with ICE futures posting moderate gains after trading on positive ground for most of the session. July cotton traded up to 62.07 cents per pound and settled at 61.67 cents, up 60 points. The December contract settled 47 points higher at 61.33 cents. The volume of contracts traded was the lowest in almost two months, according to one analyst.

MONDAY, MAY 23

July cotton traded lower for most of the session and was confined to a narrow range of 73 points. The contract settled at 61.45, down 22 points. Most of the other contracts settled with modest, single-digit gains. December settled one point higher at 61.34 cents as volume again was low. Crude oil and grains traded lower, and the dollar was inching higher as the ICE session began.

TUESDAY, MAY 24

Cotton futures rallied strongly following a quiet start at ICE as active buying moved July to a new high late in the session. The contract settled 156 points higher at 63.01 cents per pound, and December cotton gained 111 points to settle at 62.45 cents. Volume was estimated at 39,100 contracts, more than double the previous session’s volume. Traders were surprised by the rally following the preceding lethargic sessions. Support for the cotton market may have come from stock market gains possibly stimulated by a positive housing report.

WEDNESDAY, MAY 25

Futures spent the day consolidating following Tuesday’s action and settled mixed. Front months began the session around unchanged, trading in a narrow range for much of the remainder of the session. Selling sent July cotton to a low of 62.37 cents, but the contract managed to settle at 62.90, down 11 points. December did better, settling 9 points higher at 62.54 cents.

THURSDAY, MAY 26

Bulls regained control, and most futures contracts settled with triple-digit gains following the weekly export sales and shipments report. July settled at 64.33 cents, up 143 points, and December settled 140 points higher at 63.94 cents. Volume was estimated at 42,800 contracts.

In other news, USDA reported 46 percent of the U.S. cotton crop had been planted as of May 22 versus the five-year average of 54 percent. Texas plantings were pegged at 31 percent compared to the five-year average of 41 percent. Oklahoma and Kansas plantings stood at 30 percent and 6 percent respectively.

Sales from China’s cotton reserves now total more than 2.3 million bales. Imported cotton has accounted for 54 percent of the cotton auctioned thus far.

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