cotton market outlook -...
TRANSCRIPT
Cotton Market Outlook
John RobinsonDepartment of Agricultural Economics
Texas A&M University College Station, Texas
TWITTER: @aggie_profFACEBOOK: https://www.facebook.com/AgriLifeMasterMarketerNEWSLETTER: http://agrilife.org/cottonmarketing/
Background: World Cotton Production and Consumption
65.00
75.00
85.00
95.00
105.00
115.00
125.00
135.00A
ug-8
6A
ug-8
7A
ug-8
8A
ug-8
9A
ug-9
0A
ug-9
1A
ug-9
2A
ug-9
3A
ug-9
4A
ug-9
5A
ug-9
6A
ug-9
7A
ug-9
8A
ug-9
9A
ug-0
0A
ug-0
1A
ug-0
2A
ug-0
3A
ug-0
4A
ug-0
5A
ug-0
6A
ug-0
7A
ug-0
8A
ug-0
9A
ug-1
0A
ug-1
1A
ug-1
2A
ug-1
3A
ug-1
4A
ug-1
5
Mill
ion
Bal
es
ProductionConsumption
Monthly supply/demand August 1986 – October 2015
Demand IndicatorsU.S. Export Sales and ShipmentsDownstream Demand PullOutside Markets– Retail Demand and General Economy– Currency Markets– Speculative Buying
55.00
60.00
65.00
70.00
75.00
80.00
85.00
90.00
95.00
100.00
-50.000.00
50.00100.00150.00200.00250.00300.00350.00400.00450.00500.00550.00600.00
8/7/20
148/1
4/201
48/2
1/201
48/2
8/201
49/4
/2014
9/11/2
014
9/18/2
014
9/25/2
014
10/2/
2014
10/9/
2014
10/16
/2014
10/23
/2014
10/30
/2014
11/6/
2014
11/13
/2014
11/20
/2014
11/27
/2014
12/4/
2014
12/11
/2014
12/18
/2014
12/25
/2014
1/1/20
151/8
/2015
1/15/2
015
1/22/2
015
1/29/2
015
2/5/20
152/1
2/201
52/1
9/201
52/2
6/201
53/5
/2015
3/12/2
015
3/19/2
015
3/26/2
015
4/2/20
154/9
/2015
4/16/2
015
4/23/2
015
4/30/2
015
5/7/20
155/1
4/201
55/2
1/201
55/2
8/201
56/4
/2015
6/11/2
015
6/18/2
015
6/25/2
015
7/2/20
157/9
/2015
7/16/2
015
7/23/2
015
7/30/2
015
8/6/20
158/1
3/201
58/2
0/201
58/2
7/201
59/3
/2015
9/10/2
015
9/17/2
015
9/24/2
015
10/1/
2015
10/8/
2015
10/15
/2015
Cents/Lb.
000 Ru
nning Ba
les
Net Export Sales Nearby Futures
U.S. Upland Cotton Net Export Sales and Nearby Futures
0%
20%
40%
60%
80%
100%
120%
60
80
100
120
140
160
180
200
220
240
260 A Index
Yarn Index
Cot-Dom Apparel
Apparel CPI
index August 2010 = 100
Sources: Cotlook, Global Trade Atlas, U.S. Department of Commerce
Down Stream Market Pull
+154%
+67%+24% +8%
6.00
7.00
8.00
9.00
10.0019
70/1
971
1971
/197
219
72/1
973
1973
/197
419
74/1
975
1975
/197
619
76/1
977
1977
/197
819
78/1
979
1979
/198
019
80/1
981
1981
/198
219
82/1
983
1983
/198
419
84/1
985
1985
/198
619
86/1
987
1987
/198
819
88/1
989
1989
/199
019
90/1
991
1991
/199
219
92/1
993
1993
/199
419
94/1
995
1995
/199
619
96/1
997
1997
/199
819
98/1
999
1999
/200
020
00/2
001
2001
/200
220
02/2
003
2003
/200
420
04/2
005
2005
/200
620
06/2
007
2007
/200
820
08/2
009
2009
/201
020
10/2
011
2011
/201
220
12/2
013
2013
/201
420
14/2
015
Lbs.
/Pop
ulat
ion
Source: USDA/ERS/WASDE
World Per Capita Cotton Use
U.S. Dollar Index (DX) vs. Nearby Cotton Futures Settlement Price
60
70
80
90
100
110
120
130
8/1/
069/
27/0
611
/22/
061/
25/0
73/
23/0
75/
21/0
77/
18/0
79/
13/0
711
/8/0
71/
9/08
3/7/
085/
5/08
7/1/
088/
27/0
810
/23/
0812
/19/
082/
19/0
94/
17/0
96/
15/0
98/
11/0
910
/7/0
912
/3/0
92/
2/10
3/31
/10
5/27
/10
7/26
/10
9/21
/10
11/1
6/10
1/13
/11
3/14
/11
5/10
/11
7/7/
119/
1/11
10/2
8/11
12/2
7/11
2/24
/12
4/23
/12
6/19
/12
8/15
/12
10/1
1/12
12/7
/12
2/6/
134/
5/13
6/3/
137/
30/1
39/
25/1
311
/20/
131/
21/1
43/
19/1
45/
15/1
47/
14/1
49/
9/14
11/4
/14
1/5/
153/
4/15
4/30
/15
6/26
/15
8/24
/15
10/2
0/15
U.S.
$ In
dex
20
40
6080
100
120
140
160180
200
220
Cent
s/Lb
.
Nearby Futures
U.S. Dollar Index
Daily August 1, 2006 – October 21, 2015
Fund Sector buying of cotton futures represents a non-commercial source of (sometimes fleeting) demand.2014 major price moves up (in April) and down (June-July) appeared to be spec influenced.2015 pattern shows less influence.
Fund Influences
Cotton: Net Positions of Index Funds, Hedge Funds, vs. Nearby Futures Prices
-40,000-20,000
020,00040,00060,00080,000
100,000120,000140,000
2/7/
063/
21/0
65/
2/06
6/13
/06
7/25
/06
9/5/
0610
/17/
0611
/28/
061/
9/07
2/20
/07
4/3/
075/
15/0
76/
26/0
78/
7/07
9/18
/07
10/3
0/07
12/1
1/07
1/22
/08
3/4/
084/
15/0
85/
27/0
87/
8/08
8/19
/08
9/30
/08
11/1
1/08
12/2
2/08
2/3/
093/
17/0
94/
28/0
96/
9/09
7/21
/09
9/1/
0910
/13/
0911
/24/
091/
5/10
2/16
/10
3/30
/10
5/11
/10
6/22
/10
8/3/
109/
14/1
010
/26/
1012
/7/1
01/
18/1
13/
1/11
4/12
/11
5/24
/11
7/5/
118/
16/1
19/
27/1
111
/8/1
112
/20/
111/
31/1
23/
13/1
24/
24/1
26/
5/12
7/17
/12
8/28
/12
10/9
/12
11/2
0/12
12/3
1/12
2/12
/13
3/26
/13
5/7/
136/
18/1
37/
30/1
39/
10/1
310
/22/
1312
/3/1
31/
14/1
42/
25/1
44/
8/14
5/20
/14
7/1/
148/
12/1
49/
23/1
411
/4/1
412
/16/
141/
27/1
53/
10/1
54/
21/1
56/
2/15
7/14
/15
8/25
/15
10/6
/15
Weekly
No.
of C
ontr
acts
20406080100120140160180200220
Cen
ts/L
b.
Index Funds Hedge Funds Nearby Futures
January 3, 2006 Through October 13, 2015
Source: Commitment of Traders Supplemental Report (Futures and Options)
Hedge fund buying associated with 9 cents of this 12 cent rally, i.e., funds more influential than fundamentals
Cotton: Net Positions of Index Funds, Hedge Funds, vs. Nearby Futures Prices
-40,000-20,000
020,00040,00060,00080,000
100,000120,000140,000
2/7/
063/
21/0
65/
2/06
6/13
/06
7/25
/06
9/5/
0610
/17/
0611
/28/
061/
9/07
2/20
/07
4/3/
075/
15/0
76/
26/0
78/
7/07
9/18
/07
10/3
0/07
12/1
1/07
1/22
/08
3/4/
084/
15/0
85/
27/0
87/
8/08
8/19
/08
9/30
/08
11/1
1/08
12/2
2/08
2/3/
093/
17/0
94/
28/0
96/
9/09
7/21
/09
9/1/
0910
/13/
0911
/24/
091/
5/10
2/16
/10
3/30
/10
5/11
/10
6/22
/10
8/3/
109/
14/1
010
/26/
1012
/7/1
01/
18/1
13/
1/11
4/12
/11
5/24
/11
7/5/
118/
16/1
19/
27/1
111
/8/1
112
/20/
111/
31/1
23/
13/1
24/
24/1
26/
5/12
7/17
/12
8/28
/12
10/9
/12
11/2
0/12
12/3
1/12
2/12
/13
3/26
/13
5/7/
136/
18/1
37/
30/1
39/
10/1
310
/22/
1312
/3/1
31/
14/1
42/
25/1
44/
8/14
5/20
/14
7/1/
148/
12/1
49/
23/1
411
/4/1
412
/16/
141/
27/1
53/
10/1
54/
21/1
56/
2/15
7/14
/15
8/25
/15
10/6
/15
Weekly
No.
of C
ontr
acts
20406080100120140160180200220
Cen
ts/L
b.
Index Funds Hedge Funds Nearby Futures
January 3, 2006 Through October 13, 2015
Source: Commitment of Traders Supplemental Report (Futures and Options)
Hedge fund liquidation and outright selling associated with 11 cents of this 24 cent price decline.
Cotton: Net Positions of Index Funds, Hedge Funds, vs. Nearby Futures Prices
-40,000-20,000
020,00040,00060,00080,000
100,000120,000140,000
2/7/
063/
21/0
65/
2/06
6/13
/06
7/25
/06
9/5/
0610
/17/
0611
/28/
061/
9/07
2/20
/07
4/3/
075/
15/0
76/
26/0
78/
7/07
9/18
/07
10/3
0/07
12/1
1/07
1/22
/08
3/4/
084/
15/0
85/
27/0
87/
8/08
8/19
/08
9/30
/08
11/1
1/08
12/2
2/08
2/3/
093/
17/0
94/
28/0
96/
9/09
7/21
/09
9/1/
0910
/13/
0911
/24/
091/
5/10
2/16
/10
3/30
/10
5/11
/10
6/22
/10
8/3/
109/
14/1
010
/26/
1012
/7/1
01/
18/1
13/
1/11
4/12
/11
5/24
/11
7/5/
118/
16/1
19/
27/1
111
/8/1
112
/20/
111/
31/1
23/
13/1
24/
24/1
26/
5/12
7/17
/12
8/28
/12
10/9
/12
11/2
0/12
12/3
1/12
2/12
/13
3/26
/13
5/7/
136/
18/1
37/
30/1
39/
10/1
310
/22/
1312
/3/1
31/
14/1
42/
25/1
44/
8/14
5/20
/14
7/1/
148/
12/1
49/
23/1
411
/4/1
412
/16/
141/
27/1
53/
10/1
54/
21/1
56/
2/15
7/14
/15
8/25
/15
10/6
/15
Weekly
No.
of C
ontr
acts
20406080100120140160180200220
Cen
ts/L
b.
Index Funds Hedge Funds Nearby Futures
January 3, 2006 Through October 13, 2015
Source: Commitment of Traders Supplemental Report (Futures and Options)
Sidebar: China Influences
End of stockpiling, but…― Quality // Auction price of reserves???― Downside price risk depends on how
fast/much they work it off.― They’ve said that they want to release 9%
over the summer of 2015.
What is Impact of Chinese Farm, Trade, & Reserves Policy?
Alternative Paths for Whittling Down Chinese Stocks
China’s plan for selling 1M tonnes during Summer 2015 represents a 9% year‐over‐year reduction.
Resulting Impacts on U.S. Farm Price
End of stockpiling, but…― Quality // Auction price of reserves???― Downside price risk depends on how
fast/much they work it off.― They’ve said that they want to release 9%
over the summer of 2015.
New target price policy encourages consumption of domestic cotton.Limiting import quota reinforces this.Impact on Chinese imports???????
Summary China Issue: What is Impact on Cotton Imports?
Chinese cotton demand hits all‐time lowChinese cotton imports reached an all‐time low in September, as large domestic inventories reduced reliance on foreign supplies, at a time when economic slowdown is weighing on demand.
Website CNCotton reports that China imported just 50,900 tonnes of cotton in September, a decline of 59% year‐on‐year. This is the lowest monthly import since records began in 2005, and the second month of record low imports in a row.
The data from CNCotton follows reports on Wednesday from the China Cotton Association that Chinese imports for the first nine months of the year fell 42% to 1.16m tonnes.
Historically low and late plantingsAmple moisture in TX until August Other places also took a hit from too-cool and too-hot weatherUSDA apparently factored all that into August forecast of low yield and normal abandonment.USDA’s September and October forecasts still calling for small crop
U.S. New Crop Situation
State Area Harvested October 1 Yield Production
Alabama 312.0 838.0 545.0
Arizona 101.0 1,511.0 318.0
Arkansas 205.0 1,218.0 520.0
California 160.0 1,548.0 516.0
Florida 83.0 810.0 140.0
Georgia 1,110.0 995.0 2,300.0
Kansas 15.0 864.0 27.0
Louisiana 107.0 1,032.0 230.0
Mississippi 315.0 1,112.0 730.0
Missouri 175.0 1,070.0 390.0
New Mexico 37.3 1,042.0 81.0
North Carolina 380.0 891.0 705.0
Oklahoma 195.0 702.0 285.0
South Carolina 232.0 797.0 385.0
Tennessee 140.0 994.0 290.0
Texas 4,515.0 604.0 5,686.0
Virginia 84.0 1,086.0 190.0
United States 8,166.3 784.0 13,338.0
All Cotton Area Harvested, Yield and Production by States and United States, 2015
Source: USDA/NASS October 2015 Crop Production, Thousand Acres
All Cotton Area Harvested, 2015Alabama, 312
Arizona, 101 Arkansas, 205California, 160
Georgia, 1110Louisiana, 107Mississippi, 315
Missouri, 175N. Carolina, 380
Oklahoma, 195S. Carolina, 232Tennessee, 140
Texas, 4515
Other*, 219
Total Area Harvested = 8,166.3 Thousand Acres*Includes Florida (83.0), Kansas (15.0), New Mexico (37.3), and Virginia (84.0)
All Cotton ProductionAlabama, 545 Arizona, 318
Arkansas, 520California, 516
Georgia, 2300
Louisiana, 230
Mississippi, 730
Missouri, 390N. Carolina, 705
Oklahoma, 285S. Carolina, 385Tennessee,
290
Texas, 5686
Other*, 438
Total Production = 13,338 Thousand Acres *Includes Florida (140.0), Kansas (27.0), New Mexico (81.0), and Virginia (190.0)
10.00
15.00
20.00
25.0020
00/0
1
2001
/02
2002
/03
2003
/04
2004
/05
2005
/06
2006
/07
2007
/08
2008
/09
2009
/10
2010
/11
2011
/12
2012
/13
2013
/14
2014
/15
September Projection Final
U.S. All Cotton Production, Final Estimate vs. September Projection, and Percentage Difference,
2000 - 2014
Source: USDA/WASDE, monthly
-6.17%
1.55%
-5.07% 7.79%
11.24%7.23%
6.09%
7.86%
-7.44%-9.30%
-3.93%
-5.98%
1.23%
0.08%
-1.33%
(Million Bales)
2015 Balance Sheet
The historical variation in the production forecast suggests a possible range of 12.7M to 14.2M.
Current bottom line is mildly stock reducing, year-over-year (historically price supporting)
December 2015 Futures Settlement vs. December Futures Average Monthly Price for Stable, Larger, and Smaller Carryover Season
5456586062646668707274
J F M A M J J A S O N D
Cen
ts/L
b. (m
onth
ly)
5456586062646668707274
Cen
ts/L
b. (d
aily
)
Dec’15 Settlement Price (daily)
Stable Carryover (’95, ’97, ’98, ’99)
Smaller Carryover (’89, ’90, ’93, ’94, ’02, ’03, ‘09, ‘13)
Larger Carryover (’91, ’92, ’96, ’00, ’01, ’04, ‘05, ‘06, ‘07, ‘12, ‘14)
What About 2016?
59606162636465666768
J F M A M J J A S O
Daily
Cen
ts/L
b.
January 2, 2015 – October 21, 2015
Dec. ‘16
Dec. ‘15
Dec’16 futures in the same range2016 CBOT futures similar to 2015 –Maybe a little lower relative to cotton
No reason for big acreage shift – Low planted acreage is a set-up for later weather market
El Niño winter moisture suggests good yields & low abandonment –Unless La Niña drought starts in May
China stockpile still around
More of the Same in 2016?
January – February – March 2016
March – April – May 2016
May – June – July 2016
June – July ‐‐ August 2016
“Cotton Spin” Column, Southwest Farm Presshttp://southwestfarmpress.com/author/john-robinson
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