2016-07-06 / Farm & Ranch

Equity Markets volatile following Brexit Vote, Cotton fares better

July 1, 2016

A two-day selloff in global stock markets followed Great Britain's vote to leave the European Union (FU) on June 23. According to one report, the vote result "wiped more than $3 trillion from the value of global stocks." The markets started showing signs of recovery by June 29 with investors believing central banks would ultimately provide some stimulus.

Like equities, agricultural commodity prices fell immediately following the vote. Cotton futures traded lower two consecutive sessions before strong gains at the Zhengzhou Cotton Exchange (ZCF) provided support at the Intercontinental Exchange ( ICE) in New York. ICE futures were able to more than reclaim their losses. Meanwhile, traders and analysts were waiting for USDA's June 30 Planted Acres Report.

U. S. farmers have planted 9.82 million acres of Upland cotton this year compared to 8.42 million in 2015. USDA also reported farmers have planted 199,000 acres of Pima cotton versus 158,500 last year. Friday, June 24

Cotton futures at ICE turned bearish a day after Britain's vote to exit the EU, and contracts traded on negative ground for most of the session. December cotton slowly traded lower and eventually fell to a low of 63.83 cents per pound. The pressure kept the contract in the bottom half of its 160- point range before it settled at 64.42 cents, down 100 points. Monday, June 27

Cotton futures initially gained ground following the weekend with December reaching a high of 65.40 cents. The contract then traded sideways before selling pressure increased. December settled 4 points lower at 64.38 cents in what seemed like a day of consolidation. Also on Monday, USDA reported 56 percent of the U.S. cotton crop was rated good to excellent. The Texas crop was rated 52 percent good to excellent. Tuesday, June 28

Bulls returned to the market, and cotton futures rallied on a weaker dollar and a strong rally at ZCE. December cotton moved higher the entire session and topped at 65.97 cents then settled 148 points higher at 65.86 cents per pound. Traders noted an increase in export inquiries from India and China for nearby delivery and some new-crop inquiry from Turkey. Most of the interest from India and China, however, was for high grade Australian cotton. Wednesday, June 29

The rally stalled somewhat Wednesday, and ICE futures settled mbced. December cotton traded higher for most of the session, but near the end it struggled to find direction and settled at 65.85 cents, down 1 point. Forward months posted modest gains with support from strong gains at ZCE. Thursday, June 30

Following the release of USDA's acreage report on Thursday prices dropped and traded lower the remainder of the day. December cotton traded between 64.15 and 66.42 before settling at 64.17, down 168 points.

Traders and analysts were expecting another solid weekly export report, but they may have been slightly disappointed. USD A reported net export sales of U.S. upland cotton totaled 58,700 bales in the week ended June 23, down 66 percent from the previous week and 50 percent from the four-week average. Indonesia, India and Vietnam were the featured buyers. Export shipments for the week totaled 229,700 bales, up 39 percent from the previous week and 23 percent from the four-week average. The primary destinations were Vietnam, Turkey, Indonesia, Mexico and China. On a brighter note, USDA reported net export sales for delivery in the 2016- 17 marketing year totaled 138,300 bales. The featured buyers were Vietnam, Mexico, Colombia, and Indonesia.

The information contained herein is provided by Plains Cotton Cooperative Association ( PCCA), a farmer-owned cotton marketing cooperative headquartered in Lubbock, Texas. It is for general informational purposes only and is obtained from sources believed to be reliable; however its accuracy and completeness is not guaranteed by PCCA, and PCCA offers no representations or warranties of any kind in providing this information. Nothing contained herein is intended, or should be construed, as advice or guidance for the marketing of cotton.

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