Cotton prices stay strong, following a rise in demand

January 19, 2018 12:19 PM

General Comments: Cotton was higher as the buyers appeared once again to cover short cash market positions. Trends remain up and the tone of the market remains positive. Current buying is reflecting the fact that merchants need to buy futures to cover on-call positions rather than the overall fundamentals presented in the USDA reports last week. The reports showed that there is plenty of cotton here and around the world, but getting it out of producers' hands has been difficult and prices have been much higher than most commercials had expected.  

Commercials are being forced now to buy cotton at higher levels to cover the big on-call position of unpriced cotton that they have contracted for. Trends are still up. The hurricanes and the freeze appear to have really damaged quality and the quality losses have forced mills and exporters to pay up for better quality Cotton.  Producers remain limited sellers at best. 

Overnight News: The Delta and the Southeast will get precipitation late this weekend. Temperatures should be above normal by the weekend.  Texas will see mostly dry conditions. Temperatures will be warm through the weekend. The USDA average price is now 79.56 ct/lb.  ICE said that certified stocks are now 48,067 ba1es, from 46,067 bales yesterday. USDA said that net Upland cotton export sales were 275,100 bales this year and 104,600 bales next year. Net Pima sales were 11,100 bales this year and 0 bales next year.

Chart Trends:  Trends in Cotton are mixed to up with no objectives.  Support is at 8000, 7940, and 7870 March, with resistance of 8400, 8460, and 8520 March.


General Comments:  FCOJ closed higher as the trade assessed the potential for damage to crops from the current cold weather in Florida. Trends are up on the daily charts. There is no more cold weather in the forecast for Florida, although some readings in the upper 20’s F were seen overnight in some northern áreas for the second night in a row. Any fruit damaged this week by a freeze will now be sent quickly to processors to be made into FCOJ. 

The current weather is good as temperatures are turning warmer and there is little rain around, but the crop is small. The harvest is progressing well and fruit is being delivered to processors and the fresh fruit packers. Trees in Florida that are still alive now are showing fruit of good sizes, although many have lost a lot of the fruit.  Florida producers are actively harvesting and performing maintenance on land and trees.  Processors mostly getting field-run fruit. 

Overnight News:  Florida should get mostly dry weather and above normal temperatures. Brazil should get scattered showers and near to above normal temperatures. ICE said that no January deliveries were posted yesterday and the total deliveries for the month are now 140 contracts.

Chart Trends: Trends in FCOJ are up with objectives of 145.00 and 151.00 March. Support is at 137.00, 134.00, and 132.00 March, with resistance at 145.00, 148.00, and 150.00 March.


General Comments:  Futures were lower in New York in response to the CONAB production estimates, but higher in London.  Chart trends remain up in London on the daily charts.  New York is still mostly in down trends.  New York traders are noting the good weather currently being reported in Brazil and expect another bumper crop.  These ideas got support from CONAB as the estimate was higher than expected by the trade and was very much in line with many private estimates.  CONAB is usually the low estimate in the crowd. 

London has broken out higher on short covering from speculators and some industry buying.  Internal prices in Vietnam remain at high levels compared to London and producers and exporters appear to be awaiting to see if the market can rally further.  The price action yesterday suggests that the Vietnamese sellers might be rewarded for the patience, but they might consider fixing differentials now if the differentials are holding strong. 

The situation seems little changed in Latin America. Brazil exports are reduced at about 2.9 million bags in the latest report on what is called reduced inventories held by exporters and producers. Many are concerned about the potential for reduced Brazil production due to earlier drought and the cold and dry Winter. There is plenty of rain in some areas now and the good weather now has caused a lot of speculative and some commercial selling.  

There are also reports of short crops in parts of Central America and some areas in South America due to the lack of farmer investment from the low prices.  However, Honduras has been a very active exporter and appears to be in a position to make up the difference in exports from reduced offers in the rest of Central America and Colombia. Differentials in Central America are low.

Overnight News: Certified stocks are higher today and are about 2.012 million bags. The ICO composite price is now 114.67 ct/lb.  Brazil will get light showers each day with best amounts and coverage expected over the weekend.  Temperatures should be near to above normal. Colombia should get isolated showers.  Central America and southern Mexico should get isolated showers or dry conditions. Vietnam will get mostly dry weather, but some storms are possible in the far south.  Temperatures should average near to above normal. 

Chart Trends: Trends in New York are mixed to down with objectives of 116.00 March. Support is at 120.00, 118.00, and 113.00 March, and resistance is at 126.00, 128.00 and 130.00 March. Trends in London are up with objectives of 1840 and 1940 March.  Support is at 1730, 1700, and 1670 March, and resistance is at 1810, 1830, and 1850 March.

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About the Author

Jack Scoville is a veteran futures market analyst specializing in grains, softs, rice, oilseeds, and tropical products such as coffee and sugar. His industry contacts in South America, Europe, Asia, and North America provide him with a unique and comprehensive view of these markets. Jack began working in the futures industry over 30 years ago and spent 10 years working on the floor of the Chicago Board of Trade in various roles, starting with The PRICE Futures Group since it was established in 1988.