Recent Price Movement
After breaking through support near the 62 cent mark, and after briefly touching levels below 60 cents, cotton prices were able to bounce back a bit and have been to recover to values near 61 cents.
For the December futures contract, the recent declines resulted in life of contract lows.
In response to the decrease in prices, there were reports that mill demand started to resurface.
Upcoming export sales data should shed some additional light on how strong the increase mill interest might have been.
Wet Weather Not Helpful in the Southeast
It was a wet weekend throughout the Southeast growing region, where rain has been heavy and additional rain is forecast later in the week.
We are in the time of year when rain is not especially welcome since bolls are open.
Storms have the potential to affect color grades, and when conditions are severe, there is the possibility that bolls can be knocked to the ground.
In addition, moisture can inhibit harvesting progress. In turn, this can imply increased exposure to the elements. Some drying out in the Southeast would be welcome.
National Progress Accelerates, Conditions Generally Good
Nationally, weather conditions allowed for the pace of development to pass that from last year.
However, the percentage of acres with bolls open or harvested remains slightly behind the five-year average.
In terms of condition, half of the crop is rated good or excellent, which is a slight improvement relative to last year and a great improvement relative to recent years when West Texas was stricken with severe drought.
Wait and See Market
With the recent decline in prices, values have ventured outside of the trading range that had held them since early in the spring.
There are a number of questions facing the market. With a series of substantial revisions to USDA estimates already, one of them is the eventual size of the U.S. harvest.
As more of the harvest is collected and run through gins, we will have a better handle on that number.
We will also start moving into a more active period for export sales over the next couple months, which will help give us a better idea about demand.
In combination, that will provide more indication about where ending stocks will end up this crop year. Current projections suggest stocks will be flat to slightly lower, which suggest prices could continue to trade within their recent range.
At the moment, weakening macroeconomic outlook is hanging over emerging markets, which includes many of the world’s largest spinning and importing translate into some increased caution by cotton importing countries.