Plains Cotton Cooperative Association (PCCA) Weekly Cotton Market Report: July 22, 2016

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SELLERS REGAIN SOME CONTROL OF THE COTTON MARKET

Cotton futures prices spent most of this week correcting to the downside after exploding higher the previous week which saw the December contract gaining 872 points. For the marketing week ended July 21, December cotton gave back 90 points as the contract settled lower three consecutive sessions at the Intercontinental Exchange (ICE) in New York.

During the correction phase this week, analysts were unable to confirm any significant long liquidation by speculators as open interest actually increased by almost 4,000 contracts. A better-than-expected weekly export report and growing concerns about hot and dry weather conditions in West Texas helped end the three-day decline in futures prices.

FRIDAY, JULY 15

ICE cotton futures settled higher on July 15 for the sixth consecutive session. December cotton slowly drifted higher early in the session and was trading more than 100 points higher before the contract met resistance at the 75-cent level. The contract then struggled to find direction and settled 41 points higher at 74.28 cents per pound.

MONDAY, JULY 18

The winning streak was broken following the weekend. December began the session higher before meeting resistance again. The contract reached a high of 74.95 cents but fell to a low of 73.61. December then returned to positive ground until the final 20 minutes of the session and settled at 73.95 cents, down 33 points, as sellers took control.

TUESDAY, JULY 19

Trading at ICE was relatively quiet until selling pressure increased along with volume and trading ranges. A stronger dollar and weakness in other commodities seemed to aid cotton’s decline. December cotton briefly traded higher when the market opened but soon moved lower and traded in a narrow 50-point range for several hours. The contract settled at 73.27 cents, down 68 points.

WEDNESDAY, JULY 20

Selling pressure kept the December contract on negative ground the entire session as buyers remained on the sidelines. The contract fell to a low of 71.76 cents, its lowest in more than a week, and settled at 72.35, down 92 points. The dollar again was stronger on Wednesday, and cotton futures in China were lower.

THURSDAY, JULY 21

USDA’s weekly export sales and shipments report gave the cotton market a boost Thursday and enabled futures to regain their footing. December cotton initially traded on negative ground but found support at the 71.83-cent level when buyers took over following the release of the export report. December traded higher the remainder of the session and settled at 72.97 cents, up 62 points.

Export sales of U.S. upland cotton in the week ended July 14 totaled a net 72,100 bales for the 2015-16 marketing year, according to USDA, up 31 percent from the previous week but down 41 percent from the four-week average. Vietnam and South Korea were the featured buyers. Sales for delivery in the 2016-17 marketing year totaled a net 188,400 bales. The top four buyers were Vietnam, Mexico, Turkey, and India. Export shipments during the week totaled 186,000 bales, up 25 percent from the previous week but down 13 percent from the four-week average. The primary destinations were Vietnam, Mexico, Indonesia, Turkey, and China.

Meanwhile, the latest crop progress report from USDA was unchanged from the previous week with 54 percent of the U.S. crop rated good to excellent. Forty-seven percent of the Texas crop, 54 percent of the Oklahoma crop, and 67 percent of the Kansas crop were rated in the top two categories.

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