The summer doldrums have the cotton futures market firmly in their grasp with low volume and a narrow trading range now the norm. Fundamentally, demand remains steady with dwindling supplies of cotton the main cause for smaller export sales. Cotton futures trading on the Intercontinental Exchange (ICE) is lackluster without the absence of typical summer crop uncertainties. The market longs for fresh fundamental news to kick start trading.
"Without a major pickup in export demand, and as long as the crops of the world are progressing normally, it may be hard to recreate enough bullish enthusiasm to end the summer doldrums," a trader said.
The U.S. cotton crop now is projected 50 percent larger in 2010 than the year before. Rebounding textile demand drove prices higher as the economy recovered, and farmers planted more of the crop as those prices made it an attractive investment. Cotton prices rebounded in late 2009 and through early 2010, and prices still are 25 percent higher than they were at this time last year.
However, consumers purchase fewer textiles when finances are tight. Some market observers say cotton prices now are falling as the outlook for a big supply of cotton is met by questionable demand due to ideas of a flagging economy.
In the meantime, the U.S. cotton crop continues to thrive. Favorable planting and development weather also is adding to potential output. In the week ended July 11, 67 percent of the U.S. cotton crop was rated in good to excellent condition, up from 65 percent the previous week, according to USDA data. The portion of the crop rated very poor to poor was seven percent compared to nine percent the previous week. In fact, the department's figures indicated the U.S. crop continued to make good progress and not just from a conditions standpoint, but from a maturity perspective as well.
As we head into the heart of the U.S. cotton growing season, there are few areas in the U.S experiencing anything but ideal conditions. Traders now have begun to focus on the maturity of the crop due to the relatively tight carryover. Sunday's report showed the U.S. crop is maturing ahead of last year and even ahead of the five-year average with 79 percent of the crop setting bolls versus 74 percent last year and 64 percent the previous week. The five year average is 68 percent. An early US crop would bode well for 20 10-11 export prospects.
Last season's crop continues to be in demand as the export report for the week ended July 8 showed just how hungry the world's spinning mill were for cotton. Total net sales were tallied at 107,600 bales. Although the figure was down nine percent from the previous week and 30 percent from the four-week average, it was considered quite healthy due to the dwindling supplies of cotton. China was by far the largest buyer for the week with purchases totaling 48,700 bales. Brazil and Taiwan rounded out the list of top three buyers with 15,000 and 14,200 bales, respectively. Net sales of 238,900 bales for delivery in 2010-11 were mainly for China, Turkey, and Indonesia.
Export shipments of 167,000 bales were down 53 percent from the previous week and 45 percent from the four-week average. Primary destinations included China, Turkey, and Bangladesh.
On the spot cotton market, growers in Texas, Oklahoma, and Kansas sold no cotton online in the week ended July 15 compared to the previous week when 90 bales were traded.
