Weekly Cotton Market Update

Recent Price Movement

Cotton prices have shifted lower in recent trading.

After dropping through support near 62 cents/lb, recent values have fallen to near the 60 cent mark.

At their current levels, December futures have been setting life of contract lows.

In terms of prices for the most actively traded contract, values are at their lowest since January.



Outside Market & International Influences

Factors affecting prices have most likely arisen more from the demand side, with mill interest reported as sluggish around the world.

Concerns about the macroeconomic environment have not been helpful.

Another factor that may be affecting prices is the weather in India.

The Indian monsoon season which runs from June through September, is winding down.

In El Nino years, such as this one, the Indian monsoon can be lighter than average and rainfall has been an on and off over the past several months.

Nonetheless, precipitation did occur over the most important cotton producing areas and this has been cited as a factor that helped to push Indian prices lower.

Since India is now the world largest cotton producer and has consistently been the world’s second largest exporter, there could have been some effect on international prices as well.



Crop Condition and Progress

The crop situation in the U.S. is still somewhat uncertain following two months of significant revisions in the official USDA forecasts.

While development has been a little later than usual throughout the season, the latest progress data indicated some catching up had occurred last week.

Currently, nearly 60% of the national crop has begun setting bolls.  This is ahead of last year and marginally behind the long term average.

In terms of harvesting, about 10% of the crop has been collected so far, and this is also just slightly behind average.

Crop condition is looking good relative to recent years, with more than half of the crop rated good or excellent and only 12% poor or very poor.

With the national crop in relatively decent shape, the possibility remains that the USDA could lift their production numbers again in coming months.

Whether or not this happens, and whether or not export figures in tandem, will shape the 2015 carryout figure.

While the demand side can be expected to continue to be influential, the size of U.S. ending stocks should also help shape price direction this crop year.