Cotton Marketing News

September 26, 2022

The market continues to find ways to surprise and shock and sometimes make us happy and sometimes disappoint. If it can, the market has a way of provong all analysts wrong at some point. After trading over a $1.00 for the better part of the last almost 8 months

September 12, 2022

Compared to that of the previous week, last week’s market activity, though subdued, was encouraging. In much need of support after giving up over 14 cents and crashing through both the 100-day and 200-day moving averages.

August 16, 2022

Ten days ago, in this space my headline said “Prices Should Begin To Find Direction Soon” Direction has now been realized as prices have gained significantly– giving growers new hope after we were in the upper 80’s just a few weeks ago.

August 5, 2022

Prices should begin to find direction soon.

Prices have recovered__it’s not yet as hight a recovery as we hope for but we’re currently up over 10 cents from the low.

Prices seem to be “wobbling” mostly between 90 and 96 waiting for more definitaive signals to verify direction.

 

July 15, 2022

Crop uncertainty has taken a back seat. Economic and demand fears have taken control. Dec futures closed today at 83.71 cents. The chart below clearly shows the blood bath this market has taken in just the past month.

 

July 6, 2022

With much higher costs this season, this season, the present demise in price is reason for much concern. Profit will depend on marketing (how much is already price., will prices recover and how much, and remaining price decisions) and yield and fiber quality.

June 15, 2022

Dec futures have been ranged between roiughly $1.17 and $1.32 for over 2 months-reaching 3 consecutive new contract highs before taking a downturn over the past month. After making somewhat of a recovery back to the 

May 24, 2022

Has New crop met its pre-harvest high? Maybe. But it’s not 100% certain. So, maybe not. No one can say. So, make decisions and manage price risk accordingly.

May 13, 2022

USDA’s monthly crop production and supply and demand estimates for May, released today, show revisions for the 2021 crop and are also the first such estimates for the 2022 crop.

April 12. 2022

A lot has happened in recent weeks. let’s recap some of the major supply/demand and other market factors” USDA Prospective Plantings report estimates that farmners intend to plant 12.234 million acres of cotton this year–up 9% from last year.

March 16, 2022

Costs for 2022 will be extremely high. Also farmers will be doing what they can to trim inputs and costs in hopes that yield can still be maintained.  Weather is also a concern as usual but input management now creates a degree of added uncertainty.

January 20, 2022

It has been a very wild last three weeks. Prices have suddenly found new optimism and bullish momentum. To be frankly honest, few could see this coming. Now, few can know how far this will go.

 

December 30, 2021

Old Crop March futures hit just shy of $1.13 today  up 284 points (2.94 cents per lb.). New crop dec futures closed at 91.65 cents– up .35 cents.

November 30, 2021

It’s not just cotton. All commodities and the US stock market as well, are reeling from news of a new virus strain. Should growers be concerned?

November 10, 2021

Today’s USDA reports were mostly neutral to either slightly bearish or slightly bullish depending on your view. Regardless, prices took off anyway. There are some factors in play that production and supply-demand don’t account for or fully explain.

October 21, 2021

The first forecast for World demand or use by the USDA for 2019 crop year (for the period August 1, 2019 through July 31, 2020) was just under 126 million bales, if realized, this would have been a new record high.

October 15, 2021

December futures peaked to close at almost $1.12 on October 7th. This was followed by 4 consecutive lower days to just under $1.04 on October 13.

October 1, 2021

Looking back 6 months, the move to 80-85 was the first pricing action for some growers. It was considered a good price risk management opportunity. Then price (Dec futures) moved further to 90 cents.

September 16. 2021

The strong trend in prices seems to have leveled out. Prices (December Futures) have been mostly in the 92 to 95 cent range for the past month plus. Dec. closed at almost 95 cents on Aug. 17 Followed by a close of 92.3 cents on Sept 1.

August 30, 2021

Most of the time, but not always, prices tend to trend down into the harvest months. It’s called seasonality and for that reason, farmers like to price some portion of their crop prior to harvest. How much varies from farmer to farmer and depends on how much risk he/she is willing to take on an unknown future.

July 30, 2021

A positive spin on things first. This appears to be shaping up as one of those rare and blessed years where most producers will enjoy both a good crop and a good price.

July 13, 2021

Prices continue to show strength. New crop December futures closed today at 88.16 cents–the highest in a month and topping 88 cents for the third time near the contract high.

June 14, 2021

If you feel like you are “behind” in your pricing/price protection and have been waiting for opportunity to get caught up, here you go. We mentioned a couple of weeks ago that prices

June 1, 2021

Years and years long ago, I was attending a conference in Ames, Iowa. It was 105 degrees in the middle of a drought. The corn market went down limit for the day. The reason? It rained in downtown Chicago.

May 17, 2021

The market was down 4 of 5 trading days this week with big blows of down 237 points yesterday and another 208 points today. let’s look briefly at 3 contributors to price action this week.

May 3, 2021

The market (new crop Dec futures) seems to be working its way into a “comfort Zone” of mostly 81 to 87 cents. Ahead of USDA’s May supply/demand numbers on the 12th…

April 15, 2021

From the peak at the near 88 cents in late February to the decline to near 76 cents in late March, cotton price (new crop December futures) are trying to mount a comeback.

April 5, 2021

The hopeful return to the upper 80’s has stalled. The market (new crop Dec futures) was in a downtrend for the month of March and April isn’t starting out any better.

March 29. 2021

What’s happened to all the bullish optimism? The economic and marketing fundamentals have not changed all that much, if any. Yet, cotton is now struggling to somehow maneuver its way back to 80 cents.

It’s been a different tone to the market the past couple of weeks. Have we seen the pre-plant peak? Has the trajectory changed?
New crop December futures peaked at 87.66 cents back on February 24 and then marked another near-peak close at 86.79 on March 1. Since the peak close on Feb 24, prices have trended down—closing down 7 of the 12 trading days since and is looking lower again today after closing at 84.2 cents last Friday.
I

March 1, 2021

Prices have continued to show upward strength, although down sharply today–putting a halt to 9 consecutively higher days. Cotton futures were down 300 to 400 points today with old crop may at 89.69 and new crop Dec at 84.78.

February 12. 2021

Cotton prices have been highly variable (wild) over the past week or more with triple digit moves up and down for 6 consecutive days Feb 4-11. Typically, this can be a sign of market surprises (good or bad) and/or nervousness.

February 8, 2021

This market is crazy unpredictable and unknown…but so far, in a good way. The multitude of factors impacting price are as complex as I’ve experienced in over 30 years dealing with cotton. This includes: Expected demand growth (rebound) after stunning weakness.

January 15, 2021

Old crop March futures pushed above 81 cents this week. new crop December has topped 77 cents. Old crop was down a little today to close out the week but cotton enjoyed another good week due to several positive reports released.

 

January 7, 2021

2020 is now in the rear view mirror. We gladly say good riddance as 2020 was not a good year for many and for many reasons. 2021 brings hope of better outcomes. Old crop March futures has now reached the 80-cent area. The recovery in prices since the lows in late March-early April has been phenomenal

December 15, 2020

Last week was the best week news-wise for cotton in quite a while. USDA’s monthly production estimates finally showed the lower US crop that many have long said was out there.

November 20, 2020

Pricing opportunities have now moved to basis the march futures. So, you may notice the futures look to be a bit higher. That’s due to the spread between Dec and March. At present, march is about 2.3 cents higher than expiring December.

After making a long upward run and recently peaking at over 72 cents-the highest price in 9 months ( since January), the market (Dec futures) declines and testing support at 68. Prices thus far this week have gained back to 70 cents area.

October 23, 2020

Cotton prices have now trekked into territory that no one thought possible a few months ago. Not now, not this soon. December futures are now approaches 72 cents and had thus far gained 2.02 cents for the week, 6.15 cents for the month of October…..

Blog

March 29, 2022

U.S. Cotton Trust Protocol Enrollment Just Got Easier –

Authorize Your Crop Consultant Today

To aid with enrollment in the U.S. Cotton Trust Protocol, growers can now authorize account access for their crop consultant who can enter information on their behalf and ensure data accuracy. Consultants can input as much as 80% of the required information needed to complete grower enrollment. Encourage growers you know to contact their crop consultant today to get started.

 

As a reminder, growers who finalize their enrollment and data entry for the 2021-22 crop before the April 30, 20222 deadline will have an opportunity to receive redistribution of program revenue.

 

Growers can get started or complete their enrollment at www.TrustUSCotton.org. For questions or assistance, they can reach out to the Grower Helpdesk at growers@trustuscotton.org.

 

October 22, 2021

Cotton folks,

See below for some strategies to protect you from falling prices.  The Mar 100/90 spread is attractive since is cheaper than a straight Mar 100 put at the same strike price, and has protection for longer than a December strategy.  But the December strategies are cheap and may fit your need.  We now have a live account with Stonex, so can execute these strategies on your behalf any time you like without the rigmarole of having to set up your own account.

Gary

Disclaimer:

The content of this communication contained herein are for educational and informational purposes only.  We are not providing advise or recommendations, as you must conduct your own independent research and analysis before making any marketing or other financial decisions.  The links on this website are being provided as a courtesy and for informational purposes.  Nothing contained herein shall be construed as offering any opinion or advise.

 

Good morning Gary,

I hope all is well. Are you guys starting to gin now?

I wanted to put together a couple of strategies for you now that you have the futures account ready to go so that you can share these with anyone who is interested. My first idea for you would be for producers to consider buying put options either on Dec21 or Mar22 for some downside protection until they can sell their bales. This market is pretty unpredictable right now and prices are great but we don’t necessarily know for how long they will last above $1.00, so I think it’s a good idea to put in some “floor” prices through the use of put options.

Here are a couple of examples with current prices:

  • Dec21 102.00 cents put option costs 1.50 cents

              ExampleTotal cost = 1.50 x 500 (cotton market multiplier) x # of contracts (lets say 10 contracts for example’s sake which is 1000 bales) = $7,500 premium paid upfront. (plus commission/fees)

  • Dec21 100.00 cents put option costs 1.00 cents

  • Dec21 105/96 put spread for 2.20 cents cost. This strategy means that you would Buy the 105 put and sell the 96 put to lessen the cost of the higher strike put, and it creates a range of protection from 105 down to 96 cents.

  • Mar22 95.00 cents put option costs 3.20 cents

  • Mar22 100.00/90.00 put spread for 3.40 cents cost.  Again, same as above this put spread strategy gives you coverage starting at a higher strike price (100), but is limited to the range from 100 to 90 cents.

March options are more expensive right now because they carry more time value until expiration, so it’s a tradeoff, it gives protection for a longer period of time, but you pay more upfront. You could also start by positioning on Dec21 and then as it gets closer to expiration you can move that coverage out to Mar 22.

Let me know your thoughts or if you have any questions on these.

Thanks!

 

Bailey Thomen

Risk Management Consultant

 

 

StoneX Financial Inc.

NASDAQ: SNEX

Office: +1-305-925-4808

Mobile: +1-786-747-9297

www.stonex.com

bailey.thomen@stonex.com 

1251 NW Briarcliff Pkwy. Suite 800
Kansas City, MO 64116

 

 

 

 

 

July 14, 2021

This information was revised from July of 2013 (Whitaker, Collins, Harris & Culpepper) – since our cotton crop was planted over a very long window we have many different cotton ages across the county. Excessive amounts of rainfall have occurred in several areas of the cotton growing region in Georgia…read more

See the latest Blog post from Plow Points!

May 26. 2021

So I know 95 and 96 degrees are not “hot” for South Georgia. But it is hot, when we have had such mild conditions thus far in 2021. We received several emails from our UGA Extension Specialists this week on planting considerations and young crop issues that may arise.

 

 

May 12, 2021

We had our weekly Top Third/Stonex/Regions marketing call this morning.  The markets have all been volatile, and everyone is waiting for today’s reports to see what they will do.  The general consensus is that it is too early for USDA to make big adjustments in planting or yield numbers.  Stonex believes that there is still upside in the cotton market, but that 85 cents on December is a pretty good number and it would be wise to have 20-30% of your anticipated crop contracted at that level.  Purchasing call options on part of that would still leave you room to get upside while removing the downside risk on those contracted bales.

 

As usual if there is anything we can do to help, please let us know.

 

Gary

 

Disclaimer:

The content of this communication contained herein are for educational and informational purposes only.  We are not providing advice or recommendations, as you must conduct your own independent research and analysis before making any marketing or other financial decisions.  The links on this website are being provided as a courtesy and for informational purposes.  Nothing contained herein shall be construed as offering any opinion or advise.

 


The USDA, WASDE March 9, 2021 supply and demand projections for the 2020/21 marketing year put U.S. ending stocks down by 100,000 bales and world ending stocks down 1,146,000 bales from the February 9 estimate.

May and December futures were trading down 250-300 points ahead of the WASDE March 2021 report. While increases in consumption and decrease in production lead to lower ending stocks, futures added another 100 points to the losses in the thirty minutes after the report. The trade anticipated a 100,000 – 250,000 bale increase in U.S. exports which didn’t come, and a 100,000 – 300,000 bale decrease in U.S. production which did come.

The U.S. numbers show an anticipated decrease in production of 253,000 bales. There was no change in exports of 15,500,000 bales, which many think are justified. U.S. domestic use is down by 100,000 bales from last month to 2.3 million bales. This is up 150,000 bales from last marketing year, but down 700,000 bales from the 2018/2019 marketing year.                        

The WASDE projections show a decrease in global production of 827,000 bales, and an increase in global consumption of 255,000 bales.          Projected world ending stocks are revised down to 94.589 million bales. 

Globally, production is seen to be higher compared to last month in only one country – Senegal. Production was lower in Brazil (-500,000), Mexico, South Africa, and the United States (-253,000). Consumption is higher in Bangladesh, Pakistan, Turkey, and Vietnam, but lower in Azerbaijan, Mexico, South Africa, Taiwan, and United States. The WASDE projects increased global trade over last year and projected that imports will be higher for Bangladesh (+200,000), Pakistan (+200,000), Turkey (+200,000), and Vietnam (+100,000) and 90,000 bales for Taiwan.

March 3, 2021

We had a good meeting this morning on the Regions/Top Third/Stonex marketing call.  After last week’s wild volatility it was helpful to hear some analysis of why and what is coming.  Bailey Thomen of Stonex spoke about the cotton market.  While she, and everyone else, had been saying that the cotton market was overbought and in need of a correction the speed and depth of the fall was a surprise.  She believes that the ferocity of the drop was driven by speculators moving out of commodities and into other investments such as treasuries. 

From other sources it appears that such moves were made as much from outside influences like the dollar and other commodities as anything cotton did.  Mills and merchants were also closing positions and this helped drive the selloff even harder.  So what going forward, has cotton seen its peak?  Bailey says that demand is still strong, and there is very little cotton left to sell in the US right now which should be supportive of prices.  The key thing to watch to determine the direction the market will take from here is the WASDE report coming out next Tuesday.  It is expected to still show good demand and low production. 

Things to watch will be how China is doing on the demand side – are they still keeping up purchases against their phase 1 agreement?  Even though they have not completely met those requirements to date they have been working at it.  If this drops off it could hurt prices.  And what does global production look like?  Pakistan is having problems with their crop and further reductions in their production would be supportive of prices.  In the US,  if production numbers stay where they are prices should stay good.  Bailey believes that the continued drought in Texas will create abandonment that will keep bales down even if acres stay around the 11.5-12 million level.  As long as the crop stays below 17.5 million bales she thinks the prices will remain good.

 

Gary

 

Disclaimer:

 

The content of this communication contained herein are for educational and informational purposes only.  We are not providing advice or recommendations, as you must conduct your own independent research and analysis before making any marketing or other financial decisions.  The links on this website are being provided as a courtesy and for informational purposes.  Nothing contained herein shall be construed as offering any opinion or advise.

2021 Seed Cotton (SC) ARC/PLC Quick Read and Decision Aid
Don Shurley
Cotton Economist-Retired
Department of Agricultural and Applied Economics, University of Georgia

2021 Seed Cotton (SC) ARC/PLC Quick Read and Decision Aid

Click Below For The Full Report 

 2021 ARCPLC 

Producers may elect and must enroll in ARC or PLC, by crop by farm, for the 2021 crop year by March
15. If no election is made, the election previously made for 2019-2020 will remain for 2021.
PLC is a payment based on a market price trigger—if the market price is less than the Effective
Reference Price. ARC is revenue based. Payment is received if Actual Revenue is less than the Revenue
Guarantee which is based on price and county yield history.
2020 Seed Cotton PLC
The PLC Payment Rate for the 2020 crop is currently projected at 2.06 cents per lb. This will change—
the 2020 crop marketing year for seed cotton does not end until July 31.
The MYA price for seed cotton is a weighted average price for cotton and cottonseed. The average
cotton price for the 2020 marketing year is currently projected to be 68 cents per lb. The cottonseed
price is currently projected at $190 per ton (9.5 cents per lb). 

 

February 9, 2021

The WASDE report came out today and was pretty much as expected.  After climbing all morning the market dropped slightly upon receiving the report. Higher exports and unchanged production led to a lower ending stock number.  Export was raised by 250,000 bales to 15.5 million bringing ending stocks down to 4.3 million bales. 

World production is up 1.3 million bales led by a 1.5 million bale increase in China and a 500,000 bale decrease in India.  World consumption is up 1.5 million bales with the largest increase as 1.0 million bales in China.  This resulted in world ending stocks decreasing by 600,000 bales to 95.7 million bales, 3.2 million bales lower than last year.

The cotton ginnings report shows total US upland cotton ginned at 13.5 million bales.  Georgia is at 2.1 million bales. 

 

 Reply  Reply All  Forward

January 27, 2021

Some information from the Top Third call this morning.  There was a bump in corn and beans due to rumors about swine flu in China.  This has since been determined to not be as bad as expected and prices are recovering.  Other things to watch include the trucker strike expected to come in February and how it impacts South American commodities.

On the cotton side, Bailey Thomen was added to the call this week and will be on the call every week now.  She is a cotton market expert with Stonex.  She believes that even though cotton prices have been stable this week between 81 and 82 cents that they will continue to move higher.  The next point of resistance she states will be at 83.98.  Asked about advice for growers looking to market their cotton she recommends considering taking advantage of the current price to sell about half your crop, and hold about half back depending on your risk tolerance.  Current prices are certainly good.  To further reduce risk but still look for upside she recommends buying a May call for what you sell, and/or buy a May put at 80 or 81 cents for what you hold back to protect your downside.

If any of you would like to listen in on the weekly calls and ask Bailey questions please let me know and I will send you the call information.  Or ask Michael Sapp at Regions bank and he will do the same.  I am working with Top Third and Stonex to see if we can set up a program with them to offer you individualized advice and provide the ability to execute puts and calls through us to make the paperwork and money flows easy.  I will keep you all updated as that progresses, but in the meantime if you have questions we can put you in touch with Bailey or Dan as needed.  Just let us know.

 

Thanks,

Gary

 

Disclaimer:

The content of this communication contained herein are for educational and informational purposes only.  We are not providing advice or recommendations, as you must conduct your own independent research and analysis before making any marketing or other financial decisions.  The links on this website are being provided as a courtesy and for informational purposes.  Nothing contained herein shall be construed as offering any opinion or advise.

 

 

January 14, 2021

The weekly export report came out this morning.  Net sales were up from the previous week and up 2% from the 4 week average to 326,000 bales.  Increases were from China, Pakistan, Turkey, Bangladesh, and Vietnam offset slightly by decreases from Hong Kong and Malaysia.  Exports were also up from the previous week and 2% from the 4 week average to 274,600 bales.  This continues a week of good news for cotton production and demand.

Some other information, yesterday US Customs and Border Patrol announced a Withhold Release Order on cotton (and tomato) products from the Xinjiang region of China due to the alleged use of forced labor for production.  This follows a WRO several weeks ago that was only for specific companies, not the entire region.  We will have to watch and see what impact this has on US cotton.

This week is the Southern-Southeastern Annual Meeting.  So far the topics have been mostly around the production, demand, sales, and exports numbers impacting price and support all the information we have been sending out.  One other item that a great deal of time was spent on was the US Cotton Trust Protocol.  The thing that got my attention was a list of VERY large manufacturers who have committed to using ONLY sustainable cotton at some point in the next 2 to 5 years.  At that point US Cotton that is not part of the US Cotton Trust Protocol will be shut out from supplying those manufacturers.  We all need to work to understand over the next few seasons what this requires and work diligently to get listed under this protocol in order to not shut ourselves out of these markets.

 

Disclaimer:

The content of this communication contained herein are for educational and informational purposes only.  We are not providing advice or recommendations, as you must conduct your own independent research and analysis before making any marketing or other financial decisions.  The links on this website are being provided as a courtesy and for informational purposes.  Nothing contained herein shall be construed as offering any opinion or advise.

 

January 13, 2021

We had a lively call today with Top Third marketing and Regions Bank.  As a general comment at the start of the meeting Dan and Tony were talking about the bullish market in commodities and stated everyone should not be afraid to enjoy these large margins by making some incremental sales.  While I sent out the pertinent details of yesterday’s USDA reports in regards to cotton and we see how the market responded to those reports, the real big impact of the reports was to corn and beans.  If you have corn to sell and want some professional advice let me know and I will put you with people who can help.  It sounds like there is a lot of opportunity, there was even talk about hedging out to the 2022 corn crop.  The reports show significant yield and production reductions with increased exports.  Right now the US is the “only one with corn left”.

Getting back to cotton, Dan’s comment was if you do hold now, consider a 70/80 May Put spread to protect any downside.  If on the other hand you sell now and still want to take a chance on capturing upside look at an 84/94 Call spread.  Dan said some people think that cotton could go up to 84/85 cents.  For the next crop, he recommends not to get in a hurry to hedge it.  Acres nationwide are expected to drop as people look to take advantage of corn and bean prices.  He thinks it would be best to wait until the March Acreage reports come out to see what would be best to do.

 

Disclaimer:

The content of this communication contained herein are for educational and informational purposes only.  We are not providing advice or recommendations, as you must conduct your own independent research and analysis before making any marketing or other financial decisions.  The links on this website are being provided as a courtesy and for informational purposes.  Nothing contained herein shall be construed as offering any opinion or advise.

 

January 12, 2021

Several reports out today from USDA.  The WASDE report showed US higher exports and lower production and ending stocks.  This has already driven upward movement in the market today.  Production has been lowered by almost 1.0 million bales to 15.0 million bales led by a decline in Texas.  US mill use is reduced by 100,000 bales but that is offset by raising exports by 250,000 bales.  This reduces ending stocks by 1.1 million bales to get to 4.6 million bales or 26% of use. 

Worldwide, production is forecast more than 1.0 million bales lower including reductions in Pakistan, Mali, and Argentina.  Some smaller upward revisions for Greece, Australia and Turkey.  World Consumption is projected upward 100,000 bales with an increase for China and Turkey offset by reductions in Indonesia, Vietnam, and others.  Overall world ending stocks are 1.2 million bales lower this month at 96.3 million bales – 3.0 million lower than last year.  Chinas demand for US cotton has been led by State Reserve and State Owned Enterprises who have moved primary sourcing from Brazil, where is has been the last two years, back to the US.  The US is also picking up China business previously held by Australia, due to both the drought in 2020 as well as some political disputes.

The cotton ginning’s report shows the 2020 crop as of Jan 1 to be at 13.0 M bales down from 17.47 M bales last year.  Upland Cotton only is at 12.64M bales vs 17.02 M bales last year.  Georgia Upland Cotton is 1.82M bales vs 2.48M bales last year.  Some of this is smaller crop and some is later crop. 

January 8, 2021

Michael Sapp from Regions Bank was good enough to share this article.  Among other things it says that the latest PPP loan is allowing farmers to use their gross earnings for 2019 as their base rather than their net.  So if you are a farmer and you did not apply for a PPP loan because your net jncome was too low you may want to revisit that decision.  

https://www.bkd.com/alert-article/2020/12/stimulus-aid-farmers-ranchers-second-chance-ppp-loans-eidl-grants

January 7, 2021

Net sale of upland cotton were 153,100 bales, down 47% from last week and 60% from the prior 4 week average but up from 152,000 bales a year ago.  Increases were primarily from Pakistan, China, and Turkey offset by a reduction from Bangladesh. Exports were 270,000 bales down 2% from last week and 4% from the 4 week average.  Accumulated exports for the current marketing year are 5,523,400 bales up from 4,136,900 bales last year.

 

January 6, 2021

We have not had a call with Top Third for a couple of weeks, thinking that activity in commodities would be quiet over the holidays.  Well, that sure was wrong.  We had our meeting this morning.  Dan says the next point of resistance for cotton is around 81 cents, although some think it could go as high as 85.  The export report coming out tomorrow is expected to be a good one, and of course the market will move on how that report meets or does not meet the expectation.  Dan’s recommendation is to make sure you know where your costs are and what you margins are, and don’t try to time the peak.  You should be taking advantage of these prices to take profits out.  If you know where your margins are you can sell enough to make sure you make a profit and still save some to try and get upside.  Some upside and downside risk mitigation strategies to consider include buying a 78 cent 30 day put for 2 cents.  That would lock you in on the downside with what was a good price just last week and still allow you to hunt for some upside for the next month.  Another strategy would be to sell, but buy a call to give you the option to capture upside if it continues to go up.  Dan says to keep a dollar cost averaging strategy in mind, so for example if you sell 100 bales buy back 50 on paper with a call.  Again, don’t try to time the peak.  Know your costs and margins and recognize that markets “take the stairs up and the elevator down”. 

 

Disclaimer:

The content of this communication contained herein are for educational and informational purposes only.  We are not providing advice or recommendations, as you must conduct your own independent research and analysis before making any marketing or other financial decisions.  The links on this website are being provided as a courtesy and for informational purposes.  Nothing contained herein shall be construed as offering any opinion or advise.

 

 

December 30, 2020

The USDA, NASS Agricultural Prices Report for December 2020 came out this afternoon, and I thought I would provide everyone with a brief recap.  US Upland cotton average price received for November 2020 was .634 on 2.198 M Bales upon both price and volume  from .601 on 1.107 M bales for October 2020 and .597 on 2.174 M bales for November 2019.  Georgia Upland cotton average price received for November 2020 was .697  up from .631 year over year.   Across all crops prices received were up 3.9% month over month and 7.1% year over year with the drivers being beans and corn.  Livestock prices received were up 4.0% month over month but down 3.0% year over year.  Broilers and milk were up but hogs and turkeys were down.

Input prices for fertilizer is up 1.8% month over month and 7.7% year over year, with mixed fertilizer, potash, and phosphate up and nitrogen down.  Other chemicals were flat month over month but up 0.9% year over year.  Fuel is up 1.7% from October but down 8.5% year over year.  Feed is up 3.1% month over month and 5.4% year over year.  Complete feeds, concentrates, grains and supplements drive the increase with some offset from lower hay and forage. Feeder cattle and hogs are both up month over month.

 

Disclaimer:

 

The content of this communication contained herein are for educational and informational purposes only.  We are not providing advice or recommendations, as you must conduct your own independent research and analysis before making any marketing or other financial decisions.  The links on this website are being provided as a courtesy and for informational purposes.  Nothing contained herein shall be construed as offering any opinion or advise.

 

 

 

December 16, 2020

In the weekly Regions Bank/Top Third Marketing call this week there was again lively conversation about cotton.  As we discussed after the USDA reports came out last week the reduction in production and increase in demand on both a domestic and world level has driven a rapid uptick in cotton futures prices.  Coupled with a weak dollar and the release of the COVID vaccine this has resulted in the bullish run we have seen.  This makes 8 months of bull market for cotton since the bottom at the end of March.  Dan believes the next point of resistance for cotton is at 76.25 and that if cotton busts through that mark the next will be at 79.25.  As for strategy for selling your cotton, Dan with Top Third and Tony with Regions both recommend that you know your actual all-in costs and sell based on your margin not on price.  If the current price is giving you good margins then sell some.  You don’t have to sell all your cotton, but sell some and take the profits.  Dan says sell on the way up, but don’t try to pick the peak.  Prices always drop faster than they go up.  Also use puts to protect your margin from downside risk, or sell and use calls to protect upside potential. 

With the holidays coming up, there will not be any more Regions/Top Third Marketing calls until January.  If anyone has questions before then let me know and I can put you in contact with Dan.

 

Thanks,

Gary

 

Disclaimer:

The content of this communication contained herein are for educational and informational purposes only.  We are not providing advice or recommendations, as you must conduct your own independent research and analysis before making any marketing or other financial decisions.  The links on this website are being provided as a courtesy and for informational purposes.  Nothing contained herein shall be construed as offering any opinion or advise.

 

 

December 15, 2020

South Georgia Cotton Gin was one of several gins to go meet at the USDA’s Macon Cotton classing office yesterday along with Dusty Findley of the Southeastern Ginners Association.  The purpose of the visit was to see how the classing office is determining seed coat fragment, see samples of the issue, and discuss procedures and findings with them.  Of particular concern is the fact that the Macon office is the only one showing these extreme seed coat issues.  Of course, it does cover the area impacted by the suspect weather events. 

Noah Bell is over the Macon office and conducted the tours and discussions.  Also present were representatives from Cloverleaf Gin, Southeastern Gin, Coffee County Gin, and South Central Georgia Gin.  To offer a brief summary of the visit we did witness the inspectors finding seed coat fragment while we were there, and were able to independently verify their findings. 

There are definitely small seed coat fragments in the samples which can be found by touch and verified visually.  The main concern brought by the group was  that all other classing offices are using the same procedures and scrutiny.  While Noah felt sure they were, the group wanted further confirmation and to that end discussion is going to be had with Daryl Earnest, Deputy Administrator for the entire Cotton program. 

Thank you to Noah Bell and the entire USDA Cotton team for their openness and hospitality. 

 

December 14, 2020

As we get to the end of the year,  if you are looking for state tax credits to take you might want to ask your CPA about the Georgia Rural Hospital Tax Credit.  Basically you make a donation through Georgia Heart and get a 100% state tax credit for the same amount, so up to whatever your state tax will be it costs you nothing.  At this time of year there is no limit to how big a credit you can apply for.  And if you make the donation thought an LLC that can reasonably state that rural hospitals are important to its operation than you can deduct it on your federal taxes as well.  In that case you come out making more money than you donated.

Donations have to be applied for through www.georgiaheart.org and then after you have been approved you have to get the check to them before the end of the year.  So time is running out, but I recommend you ask your CPA about this and see if it will work for you in your tax situation.  It is not often you get to do a good deed and have it cost you nothing, or maybe even come out ahead.

 

Thanks.

Gary

December 9. 2020

In the Top Third/Regions Bank marketing call this morning several cotton market related issues where discussed.  Cotton price is being held where it is awaiting either a change in demand or a change in production.  There is a report from USDA coming out tomorrow, and if production is dropped in that report it might have an impact.  Also if demand jumped up it would have an impact.  Dan did not seem to want to make a prediction of either thing.  He did say, more than once, that the 7.2 million bale carryover was what was really dragging cotton prices right now.  He also remarked again, second week in a row, that fewer cotton acres are expected to be planted next year as people switch to corn and beans, and this should impact prices favorably if demand supports it.  When asked specifically about a situation where a grower has some cotton on contract and should he sell the rest, Dan said he thought it might be a good time to sell some and hold some back for later.  He also recommended buying a 71 cent put on what you hold, which would cost you about 2 cents.

 

Disclaimer:

 

The content of this communication contained herein are for educational and informational purposes only.  We are not providing advice or recommendations, as you must conduct your own independent research and analysis before making any marketing or other financial decisions.  The links on this website are being provided as a courtesy and for informational purposes.  Nothing contained herein shall be construed as offering any opinion or advise.

 

December 4, 2020

A quality update.  Seed Coat Fragment (31) issues continue with this crop in the area serviced by the Macon Classing Office of the USDA.  The problem seems to be worst in and around the panhandle area and then gets better as you moved further North and East.  For the region including 77 gins, Seed Coat was at 55.7% for the week and 33.1% for the season.  For Georgia it was at 54.5% for the week and 32.7% for the season – the lowest of the three states in the region.  Alabama was at 59.5% for the week and 32.5% for the season while Florida was worst at 63.0% for the week and 45.1% for the season.  I have had some conversations with Charlie Ricketson, Jr, who is both a member of South Georgia Cotton Gin and an owner of Broxton Insurance.  He made the following statement:  “If your yield on a farm is close to your guarantee and you have a substantial number of grade deductions (eg., 31’s), contact your agent and provide your production and grades with a weighted average cents per pound for the farm #”.  In less formal discussion, what I was told was that unless you already had substantial yield loss the seed coat fragment would not be enough by itself to trigger an insurance payment.

Disclaimer:

 

The content of this communication contained herein are for educational and informational purposes only.  We are not providing advice or recommendations, as you must conduct your own independent research and analysis before making any marketing or other financial decisions.  The links on this website are being provided as a courtesy and for informational purposes.  Nothing contained herein shall be construed as offering any opinion or advise.

 

December 2, 2020

From the Regions/Top Third Marketing call this morning.  Cotton is stuck between about 71 cents and 73 cents.  Good exports numbers this week caused a rally, then some profit taking.  If we have another big week of exports we could see another rally.  Two other good things that would be good for cotton – if USDA took their crop projection below 17 million bales and if the dollar continues to weaken which is good for all commodity exports. If all that happens might hit 74.   It is a little early to say yet, but there is talk that cotton acres will be down next year as competing commodities are doing well.  China’s buying across all commodities is down now, it is thought to be due to them waiting to see if the new administration will be more favorable to them.

 

Disclaimer:

 

The content of this communication contained herein are for educational and informational purposes only.  We are not providing advice or recommendations, as you must conduct your own independent research and analysis before making any marketing or other financial decisions.  The links on this website are being provided as a courtesy and for informational purposes.  Nothing contained herein shall be construed as offering any opinion or advise.

 

November 20, 2020

On the Top Third call with Regions Bank this week, Dan talked a little bit about cotton.  He feels that the bull market in cotton is about over.  He called the market “tired”, and said that the feeling is China will spend its money more on corn and beans to help rebuild its hog herd rather than on cotton, which along with high stocks/use numbers will tend to soften the cotton market.  He recommends if you are not going to sell soon, you should be getting a put to protect you from a turn in the market.  Current support, according to Dan, is around 67.50- 68.00.

 

Thanks,

Gary

 

Disclaimer:

The content of this communication contained herein are for educational and informational purposes only.  We are not providing advise or recommendations, as you must conduct your own independent research and analysis before making any marketing or other financial decisions.  The links on this website are being provided as a courtesy and for informational purposes.  Nothing contained herein shall be construed as offering any opinion or advise.

 

The USDA Agricultural Supply and Demand Estimates (WASDE) for November 2020 showed little change from the October estimates. The December 2020 cotton futures lost about 70 points in the three minutes after the report’s release but recovered more than half that in the next ten. A big yawn over a 300,000 bale increase in August 2021 world ending cotton stocks. Practically none of that increase was due to the 2020/21 crop supply or demand numbers. The beginning stocks for 2020/21 were increased by 378,000 bales. A world production decrease of 158,000, was offset by 158,000 bale decrease to world consumption. The increase to world beginning stocks is the net of adjustments going back seven years to the 2013/14 crop. The biggest impact coming from a 330,000 bale increase to the Brazilian 2019/20 crop, which still leaves their 2020/21 production down 1.5 million bales

For the US, the only change from October was a 47,000 bale increase to production – no change to US exports, or domestic consumption. China is projected to increase production 250,000 bales versus October estimate – no change to China consumption or imports.

The November estimates project a 400,000 bale increase in Australia’s production compared to the October 2020 estimate, which will be a 1.9 million bale increase from 2019/20. The Pakistan production estimate was reduced 800,000 bales this month which puts their production estimate down 1.2 million bales from 2019/20 marketing year.

Follow link below for details on major countries. Pages 1-3 for month-to-month and page 4 for year-over-year changes.

October 28, 2020

On Tuesday, October 27, Environmental Protection Agency Administrator Andrew Wheeler joined members of Georgia’s Congressional delegation, Ag Commissioner Gary Black, and dozens of farmers and agriculture organizations on the farm….

October 12, 2020

Attached is an interesting article regarding seed cotton moisture at harvest.  Of course at the gin we are concerned with wet cotton because it really slows the gin down.  But this article indicates it can also cost you $5-$45/bale in color penalties if picked moist.  To help everyone better understand the moistures they are picking at we are collecting moisture data this year as delivered and as ginned.

Round-Module-Moisture-Considerations-Oct-2020

 

October 9, 2020

WASDE Report

The supply and demand projects for the 2020/21 marketing year in the October USDA WASDE report put U.S. ending stocks unchanged and world ending stocks for July 31, 2021, down 2,708,000 bales from the September 11 estimate.

The U.S. numbers show a decrease in production of only 19,000 bales to 17,045,000 bales, and no change in projected U.S. exports of 14,600,000 bales or domestic consumption of 2,500,000 bales.

The WASDE projections show a decrease in global production of 934,000 bales, and an increase in global consumption of 1,520,000 bales. Most of the world’s production loss was in Pakistan (-400,000 bales) and West Africa (-530,000 bales).

Consumption increase were India (+500,000 bales) and China (+1,000,000). China also is projected to increase imports by 500,000 bales resulting in net reduction in China ending stocks of 500,000 bales.

While above numbers should be supportive of prices, if not bullish, the December future contract immediately dropped for the daily high. Prior to the 11:00 a.m. CDT release, the December 20 contract was trading at its highest level since February 24, 2020. 

Click Below For Full Report

World_2020_10_09

September 28, 2020

I encourage everyone to read this article and try to make one of the many webinars listed.  You can watch on your computer, on your phone in the tractor, or wherever is convenient.  This may not be the right time for you to join the Cotton Trust Protocol, but it is not going to go away so we all need to plan for it.

                                                                                                                        CLICK BELOW

September 23, 2020

I think most of you are past this point now, but it was an interesting article none the less.

Cotton Irrigation Termination Decisions

David Hall, Extension Water Educator, Cale Cloud, Extension Water Agent, and Wesley Porter, Extension Precision Ag and Irrigation Specialist:

As we approach the end of the growing season we are around 12 to 16 weeks after planting at the beginning of September based on a May 1 to June 1 planting. On average, we will be around 14 to 18 weeks after planting throughout the month of September. This will put our water usage just past peak and beginning to decline. UGA Extension cotton irrigation scheduling guidelines, like all other guides, must be used in…

The content of this communication contained herein are for educational and informational purposes only.  We are not providing advise or recommendations, as you must conduct your own independent research and analysis before making any marketing or other financial decisions.  The links on this website are being provided as a courtesy and for informational purposes.  Nothing contained herein shall be construed as offering any opinion or advise.

Sept. 2. 2020

Some interesting information on the Regions/Top Third call this morning.  Some things to think about.  The cotton price has now hit a “double top”, which indicates to traders that it has peaked and they should sell off.  This may drive behavior.  Some other important milestones to watch are the 200 day average which is currently 63.11 and the 20 day average which is currently 64.17.  Top Third recommends buying either puts at 62 for around 1.20 or at 63 for around 1.40.

On another note, Nancy told me yesterday that the two 2020 cotton contracts that were available have now pulled out.

 

Disclaimer:

The content of this communication contained herein are for educational and informational purposes only.  We are not providing advise or recommendations, as you must conduct your own independent research and analysis before making any marketing or other financial decisions.  The links on this website are being provided as a courtesy and for informational purposes.  Nothing contained herein shall be construed as offering any opinion or advise.

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Cotton Weekly Report

Market traders know to expect the unexpected. Following a healthy correction the prior week, cotton was expected to quietly trade sideways awaiting this weeks USDA’s Supply/Demand numbers. For the most part, it did until Thursday when the lid blew off and march futures traded nearly limit up dragging December with it.

February 4, 2021

The USDA weekly export report came out this morning.  Net sales of 286,700 bales of 20/21 crop were down 11% from last week but up 5% from the 4 week average.  Exports of 319,000 bales is up 16% from last week and 12% from the four week average.  The market rose a bit over night and seems stable so far today with this expected continued good news in the export reports. 

 

January 29, 2021

As odd as it sounds, the market has come to resemble a mountain climber. For months, it has slowly but steadily, climbed the face of a mountain searching for footholds of support along the way.

January 18, 2021

The market’s torrid pace cooled off a bit last week. Monday’s announcement of the discovery of a newer, more infectious strain of Covid caused all markets to collapse.

December 28, 2020

The market’s torrid pace cooled off a bit last week. Monday’s announcement of the discovery of a newer more infectious strain of Covid caused all markets to collapse. Close to home, March cotton futures fell 240 points on the day and spent the remainder of the short week trying to regain lost ground.

December 14, 2020

A wise man once said, “Good things come to those who wait.” No truer words have been spoken after seeing march futures settle Friday at 74.08, gaining almost two and half cents on the week.

December 10,2020

Interesting news from the USDA Reports that came out today are making the market move.  As of right now it is 74.05 for March up from 72 at close yesterday.  The USDA Crop Production Report has reduced its forecast for bales down 7% to 15.9 million bales for all cotton, and 15.4 million for Upland cotton.  From a market perspective this certainly helps move the stocks to use ratio in the right direction.  This was a big surprise to me as the Top Third marketing call this week had not mentioned the expectation of such a drop.  The FAS report show next sales for new crop was 403,000 bales which is up 45% from last week, 61% from the 4 week average, and up 30% from 277,100 bales a tear ago.  Exports were 323,200 bales up 79% from the previous week and 38% from the prior 4 week average. 

The WASDE report showed that a lot of the reduction in US production has come from Texas.  With the decrease in production and increase in exports ending stocks are at 5.7 million bales or 33% of use.  This ratio is the second highest since 2007/08.  On a global look India and Pakistan both are showing 500,000 bales reductions and consumption is up 13% over 2019/20.  This moves world ending stocks to a forecast of 97.5 million bales, 1.9 million lower than in 2019/20. 

The USDA Cotton Ginnings report shows total Upland Cotton at 9,356,450 bales for this crop, which is the lowest by far for this point in the last four years.  Georgia is at 1,008,750 bales compared to 1,758,300 bales at this point last year.  Anecdotal information I have gathered from various vendors and contacts are other gins shows that the area south and west of us in Georgia have had significant yield loss in addition to a late start and even worse seed coat fragment issues than us.  Some gins are already cutting out ginning days due to lack of cotton, while other gins are predicting up to a 1/3 reduction in total bales year over year.  I have not heard of any yield issues from growers in our area, in fact most have said they expect good yields.

If you would like  copies of the actual reports, you may go to https://www.usda.gov/media/agency-reports or let me know what you want and I will get it for you.

 

Thanks,

Gary Evans

 

 

Disclaimer:

The content of this communication contained herein are for educational and informational purposes only.  We are not providing advice or recommendations, as you must conduct your own independent research and analysis before making any marketing or other financial decisions.  The links on this website are being provided as a courtesy and for informational purposes.  Nothing contained herein shall be construed as offering any opinion or advise.

 

 

December 4, 2020

As a writer, I firmly believe words are meaningful. Last week’s market review is testament to this. The mere mention of 80 cent cotton drew tremendous response from readers.

Given it was a holiday week with traders’ minds likely elsewhere, there was little in the way of market expectations. Surprisingly, however, significant price swings occurred each day with March posting a slight gain for the week closing at 73.36.

Last week’s market was dominated by the roll activity of merchants, funds, and specs. Indicative, Open Interest on the March futures contract surpassed December as daily trading volume reached record levels.

After the previous week’s significant selloff, we were hoping last week’s activity would confirm this was only a needed correction in an overbought market. Early on, this appeared to be the case as the market retraced nearly 50 percent of those losses.

The ghosts and goblins of Halloween came early last week. In just a week’s time we experienced a hard freeze in the Southwest, another hurricane in the Southeast, an uptick in Covid cases around the globe, and a stock market decline the likes of which….

October 16, 2020

Like a restless bull trying to find a hole in the fence, the cotton market repeatedly challenged 70 cents in every trading session last week. like a sturdy fence, each attempt was thwarted most likely by harvest selling.

Active trading last week led to a great deal of price volatility. After surpassing 66 cents early, it yielded to signs economic recovery may be progressing at a slower pace than hoped. nevertheless, trading in a wide range from 66.44 to 63.90, it valiantly fought back to settle Friday at 64.99, only nine points shy of where it started the week.

Weekly Market Report from Choice Cotton includes some interesting comments on markets in general and the dollars impact on trade.  Also some upcoming reports to watch for.

Export Report

January 28, 2021

Net sales for 20/21 crop were up 10% from previous week to 322,700 bales, 22% higher than the 4 week average.  Increases were in Turkey, Vietnam, Pakistan, China, and South Korea.  Exports were down 15% from previous week and 4% from the previous 4 weeks.

January 22, 2021

Export sales of cotton were down 10% from last week and 1% from the four week average.  Exports were up 17% from last week and 18% over the four week average. 

December 17, 2020

Net current crop sales were 428,410 bales. Net current crop PLUS new crop sales were 442,180 bales. Sales continue at a strong pace-up slightly from, last week and 40% above 4-week average.

September 24, 2020

 

Current crop sales were 111,200 bales. Current crop PLUS new crop sales were 161.800 bales.

Sales returned to a more normal, and adequate level. Vietnam was the largest buyer (53,000) with China in second place (45.200). Shipments were up almost 100,000 bales from last week with China accounting for 40%.

Georgia Cotton Commission

December 31. 2020

Seed coat fragments (SCFs) have been a long-term issue for cotton and outbreaks of SCFs occur sporadically every 3 to 5 years in a region of the U.S. This year the region includes Alabama, Georgia and Florida with the biggest outbreak of SCFs calls in the last 20 years. And it is no coincidence that this is also one of the worst years for tropical storms. SCFs are formed when a part of the cottonseed wall is broken off and that broken wall is often attached to some fibers, making it particularly difficult for the gin and textile mills to remove as all their equipment is designed to keep fibers in the process.

Read More…..

Weekly Report

Click the link below for the latest version of the national Cotton Council’s Weekly Cotton market Report, providing current information and market news of interest to members of the U.S. cotton industry.

Cotton Comments

Nearby March futures made it a see-saw ride last week and we begin this week on a down note. After hitting the 74 cent level on Monday, prices moved sluggishly during the Holiday-shortened week but were then aided by a good export report on Friday.

Today’s USDA crop production and supply/demand estimates were not what was expected. The market moved down for the day but, frankly, we can take relief that price did not decline even more than it did.

The trend to even higher prices may not be over, but it has hit a snag-as expected. After closing at over 72 cents earlier on Monday this week, December futures has now declined 3consecutive days. Dec. closed below 70 cents today for the first time since October 16-in almost 2 weeks.

DScomments10292020 (1)_Page_1

October 16, 2020

Cotton is pushing 70 cents, presenting pricing and risk management opportunities for growers that I’m sure most of us never thought we would see for this crop. It’s decision time. If not priced already, this move certainly seems a good opportunity to get going or add to previous sales.

Dec. futures mad a good run at 67 cents a couple of weeks ago. Since that time, prices retreated to and bounced off the 65-cent area and now moving back to near 66.

The 65 to 67 cents area seems to be firming up.

Don’s latest comments.  Take note of the comments on the forced labor legislation.  I have heard the same comments around concerns of how this will impact China/US relations in general and Us Agriculture specifically from Top Third marketing.  They also expressed concern that the dollar has strengthened a little which is also potentially providing headwind.

 

In the most recent previous version of Cotton Comments, I said that cotton price (Dec futures) on September 1 had closed above 66 cents.  The close that day was not above 66.  I failed to recognize that the particular data and charting source I was using that day was not updating properly.  Lesson learned—from now on I will check using more than one source.  I apologize.  Don Shurley