Cotton Price Rally Slowing, Economist Says

Mar 02, 2015

By Don Shurley

Since the low in late January, old crop (May15 futures) prices have improved 6 cents. Prices thus far Friday, stand at 64.84—up just slightly (.18 cents) for the week.

Is the rally beginning to run its course? Perhaps, but we couldn’t and didn’t expect this to last forever anyway. We’ve discussed it on several previous occasions—use market rallies and timing with the available LDP/MLG to attempt to generate as much “total money” as possible.

No doubt the 6-cent rally was a “correction” that the market saw was needed and has also been supported by strong export sales at these price levels and the mill demand for quality fiber. One take-home lesson is that there must be both buyers and sellers to sustain prices at any level. Can prices continue to trek further upward? Yes, if the demand doesn’t begin to dry up. There are many market uncertainties, however, and the “slow-down” might just be a signal that the market feels a need to a breather. The 6-cent rally should now solidify a “floor” at 58 to 60 cents—but, there is likely resistance or a ceiling around 68.

New crop (Dec15 futures) prices have also edged upward—currently at near 66 on Friday. Our “magic number” is 70 cents. We’re not there yet and we may not get there anytime soon if ever—but look at where we are now compared to a month ago. Who among us thought we would be at 66 cents at this stage? If you’re growing cotton for 2015, you’ve got to be patient, understand your worst-case-scenario, and carefully evaluate opportunities as they present themselves.

The National Cotton Council survey estimates US acreage down 14.6% for 2015. At the USDA Outlook Forum last week, their estimate was that acreage will be down 12%.

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