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Markets: open cotton vulnerable


Open cotton is vulnerable to rain damage. Harvest is only 20 percent complete. The harvest price pressure could be delayed. Most weather damage maybe priced into current markets.

Slow export demand indicates that world buyers are waiting for prices to fall. The rally in cotton prices has caused world demand to plummet. Domestic cotton use is now predicted to hit a 24 year low. Weak demand is weighing heavy on cotton prices. In light of cotton demand, the market is overbought.

Shipments are bearishly trailing the USDA forecast. Chinese cotton imports are dependent on sales of clothing and household good in the United States and Europe. Until textile sales pick up, demand will remain low. Traders expect another drop in weekly export sales.


Palm oil prices pulled back 2 percent after rising last week. Higher palm oil price supports soy oil prices and consequently the price of soybeans.

Oil prices have been volatile. It is normal for oil prices to decline in October and November. Companies that supply heating oil have already lain in supplies while less gasoline is used after the summer vacation season. The biodiesel connection to soy bean prices is increasing with increased energy demand.

Chinese importers have been moving into next year’s crop. The Chinese economy is up 9 percent over last year. They are shopping for opportunities to buy crude oil.

Soybean check-off money brought the 15 largest Chinese buyers to tour the Midwest. These buyers cover 80 percent of Chinese imports.

Brazilian weather is favorable for early soybean planting. Brazil has raised the biofuel content 1 percent, increasing biofuel blends to 5 percent. Argentina has started soybean planting early due to favorable weather.

Soybean production estimates from private sources have declined to 3 billion bushels. Harvest progress was bearishly in excess of market anticipation. Half of the soybean crop is not yet harvested. Export inspections were 43.7 million bushels. That is 3.5 million ahead of last week. Export sales are expected to drop 30 percent this week. Soybean exports are nearly twice the USDA forecast. Soybean traders are taking to the sidelines until weather affected quality and quantity can be accurately estimated.


Private corn production estimates have dropped to 2.25 billion bushels from 13 billion. Importers were waiting for a decline in corn prices to buy. Canada may need ethanol imports to meet government mandated fuel standards.

Harvest has been rain delayed again in many areas. Farmers are leaving corn standing in the field to harvest soybeans. Harvest is 20 percent complete. That is remarkably behind when 64 percent is the 10 year average.

Trader profit taking from market buy contracts forced prices down. Trading is light until weather effect can be ascertained. Inflation concerns are factored into prices. Importers are waiting on lower prices. Export inspections were below market expectations at 24 million bushels. Weekly export sales are expected to increase.


Inflation support was more evident in wheat markets. The failure of inflation to materialize and falling corn prices put pressure on wheat prices. Profit taking by traders pulling money out of long market positions has spilled over from corn.

Winter wheat planting in the United States and world wheat planting intensions has dropped but current supplies are adequate to meet demand into the new crop year. The average winter wheat planting is 86 percent completed. This year planting is 76 percent complete. Planting intension will not be met.

Canadian harvest has rain delays, but Ukraine has harvested 94 percent of their grain. Ukraine increased grain export projections from 17 million tons to 20 million. Export inspections were 14.336 million bushels. Total export inspections are 5 percent behind average. Relative dollar values are gaining on other world currencies making U. S. grain more expensive overseas.


Harvest is about 85 percent complete and yields of early planted rice average 180 bushels per acre. It is unlikely yields will hold up. Late planted rice may have less potential and lodging after rains has become a problem. Weather has reduced quality and quantity of late planted rice.

Vietnam continues to undersell Thailand on rice markets. United States rice becomes more competitive when dollar values drop but that makes U. S. prices nearer Thailand prices than Vietnamese prices. Vietnamese prices are firming up putting support under U. S. rice market prices.

India eliminated their 70 percent import tax on rice. The suspension of import tax on rice is anticipated to last until the next rice harvest near September next year. This will support U. S. rice prices even if Asian supplies go to India. Other nations will buy more United States rice.


TAGS: Cotton
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