Farms.com Home   News

Shurley On Cotton: Prices Slip Under Pressure

In a recent newsletter, I referred to the sudden increase in cotton prices as “Christmas in July.” Well, as we all know, the new wears off eventually – even for Christmas gifts.

July was a good month, but, so far, August has not been. Prices have come under pressure over the past week or so and have declined 5 to 6 cents per pound. Prices (December 2016 futures) currently stand in the 71 cent area – the lowest level in a month. Prices broke sharply on August 9 and continued to decline the rest of the week.

Is there reason to panic? Well, if you took advantage of the recent rally and got a good portion of expected 2016 production priced or protected in some way, the answer is no. If you didn’t, the answer is a strong maybe.

I think a lot of growers are at least one-third priced/protected – some as much as half or maybe even more. It’s always a tough decision on how far to crawl out on the limb with bale contracts. But given last year’s prices in the 60s and in the 60s again this season until a month ago, there was little reason to turn down a sudden and unexpected opportunity in the 70s. I know some folks had 78 or 80 cents on their minds, and we never quite got there. Hopefully, some of expected production got priced before this week’s decline.

The market has gotten mixed signals over the past couple of weeks. So, the decline in prices has not been easy to digest and understand. It’s also more difficult to figure out where this market might go from here.

Crop Conditions and U.S. Crop Estimate. First of all, crop conditions have declined. The crop is not rated as well as last year’s crop, which was not a stellar crop yield wise (766 lbs/acre). But West Texas got rain, and that may have been one reason for the decline in prices. We’ve also had rains in Georgia, and the crop is looking better than it was a month ago.

But, the U.S. crop is now estimated at 15.88 million bales – up 80,000 bales from the July estimate on a yield of 800 lbs per acre. This is 34 pounds per acre more than last year (did I mention the crop is actually rated worse than last year) and 15 pounds less than the July estimate. The larger crop comes from an increase in acres expected to be harvested (less abandonment).

China Reserve. Also, official word came that China will extend their government reserve sales by a month, until the end of September. This could be good or bad. The good would be that it could lead to both higher mill use and further reduce China’s stocks. The bad is that this apparently has raised concern that China may likely import even less cotton than the already very low level it is expected to import.

World Production and Use. The USDA August supply and demand numbers dropped expected world cotton demand by 340,000 bales. This is .3% and may not be much in the grand scheme of things. But it sends a nervous signal to the market. Projected cotton use has been trending up, and it’s one of the reasons prices have improved like they have. Half of the decline comes in Vietnam, where they have been importing cotton, manufacturing yarn and shipping it to places like China. Now China is selling off its government reserves and increasing their own spinning and yarn production.

World cotton production was reduced 1.0 million bales from the July estimate. This is largely accounted for by the India crop being cut 500,000 bales and the China crop also cut 500,000 million bales. A smaller India crop is a bit of a surprise, because their monsoon season has been above average.

Click here to see more...

Trending Video

Moving Ag Research Forward Through Collaboration

Video: Moving Ag Research Forward Through Collaboration



BY: Ashley Robinson

It may seem that public and private researchers have different goals when it comes to agricultural research. However, their different strategies can work in tandem to drive agricultural research forward. Public research may focus more on high-risk and applied research with federal or outside funding, while private sector researchers focus more on research application.

“For me, the sweet spot for public private sector research is when we identify problems and collaborate and can use that diverse perspective to address the different aspects of the challenge. Public sector researchers can work on basic science high risk solutions as tools and technologies are developed. They then can work with their private sector partners who prototype solutions,” Mitch Tuinstra, professor of plant breeding and genetics in Purdue University’s Department of Agronomy, said during the Jan. 10 episode of Seed Speaks.

Public researchers they have the flexibility to be more curiosity driven in their work and do discovery research. This is complimentary to private research, which focuses on delivering a product, explained Jed Christianson, canola product design lead for Bayer CropScience, explained during the episode.

“As a seed developer, we worry about things like new crop diseases emerging. Having strong public sector research where people can look into how a disease lifecycle cycle works, how widespread is it and what damage it causes really helps inform our product development strategies,” he added.

It’s not always easy though to develop these partnerships. For Christianson, it’s simple to call up a colleague at Bayer and start working on a research project. Working with someone outside of his company requires approvals from more people and potential contracts.

“Partnerships take time, and you always need to be careful when you're establishing those contracts. For discoveries made within the agreement, there need to be clear mechanisms for sharing credits and guidelines for anything brought into the research to be used in ways that both parties are comfortable with,” Christianson said.

Kamil Witek, group leader of 2Blades, a non-profit that works with public and private ag researchers, pointed out there can be limitations and challenges to these partnerships. While private researchers are driven by being able to make profits and stay ahead of competitors, public researchers may be focused on information sharing and making it accessible to all.

“The way we deal with this, we work in this unique dual market model. Where on one hand we work with business collaborators, with companies to deliver value to perform projects for them. And at the same time, we return the rights to our discoveries to the IP to use for the public good in developing countries,” Witek said during the episode.

At the end of the day, the focus for all researchers is to drive agricultural research forward through combining the knowledge, skills and specializations of the whole innovation chain, Witek added.

“If there's a win in it for me, and there's a win in it for my private sector colleagues in my case, because I'm on the public side, it’s very likely to succeed, because there's something in it for all of us and everyone's motivated to move forward,” Tuinstra said.