2017-10-11 / Farm & Ranch

COTTON MARKET WEEKLY

Market continues to move mostly sideways

October 5, 2017

Will the hurricanes ever stop? Tropical Storm 16 is predicted to form Hurricane Nate formed in the Gulf of Mexico days ago and brought flooding and power outages in Mississippi and Alabama.

The first tropical storm forecast cone to catch traders’ attention was released Wednesday at 10:00 a.m. when the chances of a cyclone developing were raised sharply. Despite having just traded to 67.40 cents per pound on Tuesday, which was the lowest price since late August, December cotton futures jumped to 69.97, their highest level in three weeks. Speculative traders were whipsawed by the sudden development. The volume of contracts traded Wednesday surged to 34,817, double the previous week’s average daily volume. Nevertheless, prices fell back rather quickly, and the December futures price fell right back into the middle of the recent trading range. Healthy Export Sales Continue

On the demand side, U.S. shippers had net new sales of 161,000 Upland bales in the week ended Sept. 28, according to USDA’s latest Export Sales Report. The total is healthy given that sales are usually slower at this time of year as merchants and mills are content to wait and see the quality of the Northern Hemisphere crop. It is worth noting that sales still do not need to be high. Total U.S. export commitments of Upland and Pima combined have reached 7.7 million bales, about 10 percent ahead of the 5-year average pace. Harvest Progress

The market in the week ahead will depend heavily on Hurricane Nate and the October WASDE report. Although Nate certainly is not welcome, the market seems to expect relatively low levels of cotton losses. The current track puts Louisiana and Mississippi cotton in the most direct risk but spares the Southeast from the worst. Harvest is progressing rapidly, but there is a lot of open, defoliated cotton that will lose quality and yield. Monday’s Crop Progress Report will update the market on how much was open and how much was already harvested. Once Nate is past, traders will be focused on Thursday’s World Agricultural Supply and Demand Estimates (WASDE) to be released at 11:00 a.m. CDT, which is expected to more fully account for damage from Hurricanes Harvey and Irma.

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