Start Pricing This Year’s Crop

 

Plant, plant, plant continues to be the motto. But it’s also time to add price, price, price to the discussion.

 

The new crop December contract took a hit this past week, but settled at week’s end above the trend line, thus keeping the uptrend in force. The market faced an uphill battle all week – and actually lost some momentum – but came back at the end of the weekly trading period to post a close above the December trend line.

 

Thus, while the bull was scratched, he is still on the loose. Nevertheless, a good rain over the High Plains and the Rolling Plains will send prices lower.

 

Using 78 cents and better as a marker, price 35% of your 2018 crop. There will still be 65% of the crop left to hopefully hit the grand slam. Price 35% and HOPE you are wrong! The remaining 65% will get that big price, and, at the same time, you will have prevented a financial disaster should prices drop. Do not let a price that is very high in the upper one third of the historical price range pass you by.

 

In the absence of any fundamental news, cotton prices were under pressure all week as rumors floated everywhere with respect to lost markets due to the imposition of U.S. tariffs. Those concerns are rather hollow for cotton and other field crops as well. Nevertheless, traders react negatively, or bearish, to market uncertainty. Thus, in just the past two-week trading period, the technical picture for cotton has turned away from a strong bullish position to simply trying to hold the 78 cent level, basis December futures.

 

Friday’s (March 23) strong close was helpful, and the market continues to find support from very impressive export sales and shipments. Additionally, the increasing on-call sales position faced by textile mill buying continues to suggest a bullish market in the April-June period. Too, the low level of certificated stocks may prove to also support higher prices in the May and July futures contracts.

 

The Chinese reserve auction remains active, but is not finding as much demand as in the prior two seasons. Nevertheless, the first two weeks indicated an average of about 100,000 bales a day in sales. Chinese mills have complained that the stocks offered at auction are of poor quality and have petitioned the government to allow more imported cotton into the country. The auction includes only 2011-2013 crop cotton, mostly of poor quality. As such, government pre-announcements have stated that additional cotton from the U.S. will be allowed to come into the country (increased U.S. exports).