Cotton On-Call 03 02 2023

Wholesale Boxed Beef prices backed off again on Friday morning with a 16 cent drop in Choice and a $1.64 drop in Select. USDA had FI cattle slaughter at 502k head for the week through Thursday. That compares to 503k head last week and matches the same week last year. Midday cattle futures are trading with $0.50 to $1.05 gains so far. The feeders are rallying 1.2% to 1.4% with gains of as much as $3.42. USDA again had few cash trades to report for Thursday, but showed limited $182 sales in NE.

Last year when I wrote that article, the front month continuous hog chart had just tested $70.00 support with prices rallying as high as $122.00 by August of 2022. One year ago, front month rice futures were trading near $14.40, with prices now near $17.60 still trading near the $18.00 highs of the year. Midday cotton quotes are trading with 89 to 300 point gains. The June Acreage data from USDA showed 49.628m acres were planted for wheat. That was a slight reduction from the March report as winter wheat dropped 500k acres and spring wheat was raised by 600k. The HRW ground was reported at 25.7m acres, with 7.66m for SRW, and 3.68m for white winter.

Monthly Economic Letter: April 2023

More persistent questions for the market will likely come from the demand side of the market. Global economic growth is expected to be sluggish and there have https://trading-market.org/ been widespread reports of inventory accumulation throughout supply chains. After three years of drought, significant rainfall finally arrived in West Texas.

• It would be a natural and seamless transition for the United States and Brazil to increase cotton production to send additional exports to China.
• Wholesale Boxed Beef prices backed off again on Friday morning with a 16 cent drop in Choice and a $1.64 drop in Select.
• Growers may wish to consider buying a call option once the price of the physical cotton is fixed.
• Sugar prices Monday posted moderate gains on signs of strength in demand….

Commercials were slightly more net short at 284,481 contracts. The weekly CoT data had soybean spec traders as net new buying, which extended their net long by another 22.5k contracts to 99,480. The commercials liquated significantly more longs than shorts, which expanded their net short to 170k contracts. CFTC reported lean hog spec traders at 9,465 contracts net long as of 6/27. That was a 2k contract stronger net long, again fueled by short covering. It is too early to declare the sales as bullish, but the sales are supportive.

Cotton

Live cattle futures slipped 2 to 35 cents on Monday before the July 4th break. Feeder cattle extended their historic rally by another 32 to 62 cents. USDA had no cash sales activity to report on https://forex-world.net/ Monday, a late week push in sales on Friday had the week’s bulk price was near $179 in the South, and near $182-$183 in the WCB. The final 2022 trading week in New York was somewhat bearish.

Less acres will be grown in China for cotton and instead, those acres will be used for food. It will be easy for China to adopt this transition, then choose to rely on importing slightly more cotton instead. Texas, North Dakota and South Dakota are the leaders for planted acres in the United States. Information https://forexhistory.info/ presented is provided ‘as-is’ and solely for informational purposes, not for trading purposes or advice, and is delayed. No representations are made by Barchart as to its informational accuracy or completeness. Growers know far better than I, but weather could also bring about a significant shift in plantings.

Cotton Prices Up on Acreage Report, But Demand Remains Elusive

The COT data, as reported by the US Commodity Futures Trading Commission (CFTC), is from Tuesday, and is released Friday by the CFTC. Reporting firms send Tuesday open interest data on Wednesday morning. The CFTC then corrects and verifies the data for release by Friday afternoon. The Barchart site’s data is then updated, after the official CFTC release. Futures firmed by 109 to 159 points after the NASS update….

Plantings this significant risk any significant price rally during calendar year 2023. Yet the March-July 2024 futures contracts should offer higher prices to growers as consumer spending begins to significantly increase and the demand for cotton increases. Following the pattern established on Wednesday, the nearby hog market is extending the summer months’ premiums with gains for July and August. The deferred contracts are trading 45 to 87 cents lower so far. USDA’s National Average Base Hog price was 30 cents weaker on Thursday afternoon at $94.21. The 6/27 CME Lean Hog Index was $92.96, up by another 44 cents.

Cleveland on Cotton: Slow, Long-Term Climb Ahead

That was up 6,475 contracts from the week prior due to short covering. Spring wheat spec traders were reported at a 3,001 contract net long as of 6/27, which flipped form 3.3k contracts net short the week prior. The USDA Planted Acreage report cut soybean acres by 4 million from March, to 83.5 million. The average of trade guesses was to see a slight 200k acre increase, but even the lowest estimate was only for a 500k acre cut. NASS also reported a 795.6 mbu soybean supply on June 1st.

CFTC reported short covering from the Chicago wheat spec traders. Their that was the lightest net short position since February. In KC wheat, the weekly report had managed money funds at a 12,419 contract net long.

This is not to suggest that prices will turn around this week or even next month. Likely, the market will not cycle higher until January-February, and the initial response will be slow, very methodical, and a bit limited. Likewise, the new crop December should begin a move to higher prices by February, just before Southeast and Mid-South growers settle on their “final” cropping plans. Too, it was very encouraging to note that the new crop December 2023 contract held very firmly at 75 cents despite the old crop December contract drifting lower. This is not to claim that December is ready to now move higher. However, the futures contract is clearly signaling that cotton is underpriced and longer term must move higher.

• In certain areas, precipitation was heavy enough to cause flooding.
• Thursday’s FCE auction saw $178 bids vs $180 asks for the 818 head listed.
• But now, like oats, cotton futures are likely to start work higher in order to keep higher planted acres.
• Wholesale Boxed Beef prices were firmer on Monday with a 62 cent increase for Choice and a 67 cent increase for Select.

The March, May, and July on-call sales total 4,422,600 bales versus only 512,900 bales of on-call purchases. This nearly 10 to 1 ratio of buying futures versus selling futures will provide underpinning for prices and will give any rally in the December 2023 contract a slight boost. This week’s trading pushed prices down to an 18-month low as technical fund traders dumped volume after volume of sell orders every day. They pushed prices down for seven consecutive days before letting the market come up for air. Questions are likely greater for the demand side of the market.

The Cotton Marketing Planner

Mother Nature is still looking at a La Nina weather pattern that would portend another dry season facing the High Plains and Rolling Plains of the Southwest. This means that this commodity is suited as a new addition to your portfolio as trading bullish markets is always a lot easier. Movement in NY/ICE futures was erratic, but most cotton benchmarks were rangebound over the past month.

Net sales of upland totaled 84,500 bales, while shipments of upland totaled 165,700 bales. Both numbers were lower than what a typically active market would merit but were better than the prior week as well as the prior monthly averages. Sales were made to 12 countries with Pakistan, Egypt, and China being the primary buyers. We continue to suggest 2023 U.S. cotton plantings to be between 9.0 and 10.0 million acres, with a point estimate of 9.6 million. Rotation patterns could push plantings slightly higher, while wheat prices could cause acreage to fall just below the 9.6-million-acre estimate. Both the cotton/corn price ratio and the cotton/soybean price ratio will allow grains and oilseeds to take acreage from cotton in 2023.