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Pent up demand for cotton?

Overview: Hog herds are shrinking, reducing demand for feed grains. Increasing stockpiles of grain and oilseeds are becoming a market concern.

Current weather remains favorable for production despite late planting. Favorable weather is price bearish in anticipation of a bumper crop.

Increased dollar values and lower oil prices are bearish.


Bullish factors: Cotton crop condition ratings in Texas are declining. Acres are the lowest since 1983. World cotton production is down. Indian cotton production potential is down due to less monsoon rain. Speculator buying is increasing. Inflation fears are driving prices higher. Crop condition ratings of 42 percent good to excellent are way below 53percent average. Even if cotton production was excellent there will be a fiber deficit. The economy is improving. Pent up demand and inflation may follow. The trend is positive.

Bearish factors: The world economy is weak. Cotton acres exceed market expectations by 200,000 but that amount is relatively insignificant. India is attempting to increase cotton exports by 10 percent. China is selling stored cotton to domestic mills.


Bullish factors: Weekly export sales of 444,000 tons were above market expectations. Soybean acres increased by 1.5 million, but that was below market estimates. Malaysia has a 55 percent biodiesel mandate. Palm oil diesel profitability improved.

Bearish factors: Argentina has elected a new government that is more farmer friendly supporting grain and oilseed exports. Brazil increased soybean subsidies 21 percent. Crop condition ratings were 68 percent good to excellent exceeding the 64 percent average. Export inspections of 13 million are down 2 million from the previous week. Soybean acres are a record 77.5 million acres.


Bullish factors: Corn acres have increased but the land is coming from unexpected acres commonly used as set aside which have lower yield potential. The crop is late and vulnerable to adverse weather, insects and disease, and yield estimates may be high. Southern corn is already under stress and the Corn Belt may have high temperatures during pollination.

Bearish factors: Corn remains under pressure from trader selling. China is releasing corn from reserves for sale in domestic markets keeping food prices down. Ethanol use is below USDA predictions. Acres planted to corn were bearishly increased to 87 million. The acre increase has potential to add 420 million bushels of production. The demand for meat is low, reducing feed grain use. Crop condition ratings at 72 percent are above the 69 percent average. Export inspections of 28 million bushels were below expectations.


Bullish: Wheat selling is slowing down, and harvest is behind schedule. Wheat exports of over 241,000 tons met market expectations. Weather is not favorable for wheat worldwide. Production per acre could drop below average on fewer acres. Egypt skipped poor quality Russian wheat and bought American.

Bearish: World wheat supplies are ample, depressing prices and wheat harvest is adding fuel to the fire. The market trend is negative and prices are testing new lows. Crop ratings at 76 percent good to excellent are bearishly above the 69 percent average. The trend is down.


Bullish factors: Thailand and Vietnam have limited rice exports. Total acres of U.S. long grain rice are 2.5 million and bullishly low. The U. S. rice crop was planted late and production potential is decreased. Rice water weevil infestations are increasing in Arkansas. Exports increased to 78,000 tons, over 3 times last week’s total. The trend is turning positive.

Bearish factors: Supplies in Thailand and Vietnam limit price potential. World wheat supplies are also large and people will substitute wheat for rice when prices are lower. Medium grain rice acres increased and exports for medium grain are also increasing while long grain exports lag behind.

TAGS: Cotton
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