Cotton Incorporated’s Economist, Jon Devine
Cotton prices lost some ground today. The nearby July contract gave up 23 points, and closed below recent support near 85 cents per pound.
December took over as the contract with the most open interest in today’s trading. December gave up gave up 71 points to close at 77.29 cents/lb.
Despite the decrease, December prices continue to be range-bound. Today’s decline simply pulled values back to the lower half of the tight range between 77 and 79 cents that they have been holding since stabilizing in late May. This is the same general range that December prices traded in throughout most of the winter.
It is still early in the game figures on crop development. Today’s progress and condition report represented the second week of data on squaring. In the report, 8% of the cotton belt, crop is reported to be that far along, which is 2% behind the five-year average. Today’s progress report is the first to offer crop condition data. In those figures 86% of the crop was in fair to excellent condition, last year 79% was in the same range.
As we move into the summer, the national condition figures could be helped along by the alleviation of drought conditions in West Texas. Although, most of West Texas remains in drought, the heavy rains around Memorial Day did bring some improvement. Lubbock airport did report some additional precipitation over the weekend, and more than ¼ inch today (Monday). This week’s forecast isn’t calling for additional rain in West Texas, but the arrival of any additional moisture as the crop matures can be expected to have a heavy impact on the size of national harvest, and therefore should be an important diver of price movement.