How high could cotton futures go following USDA’s surprising August Crop Production Report, which lowered the forecast for the 2015 U.S. cotton crop to 13.1 million bales from its previous estimate of 14.5 million bales?
Not as high as you might think, according to participants in the Ag Market Network’s panel of marketing experts who were polled during the Network’s monthly teleconference that followed the release of the first survey-based 2015 production report on Aug. 12.
The thinking of participants in the Ag Market Network’s panel ranged from a low of 68 cents to a high of 72 cents – better prices than growers have seen in a while, but still not much to excite them. The consensus seemed to be it would be difficult for prices to rally much above those levels given current fundamentals.
Surprisingly, the lowest estimate of the high in futures came from O.A. Cleveland, professor emeritus at Mississippi State University, who has been one of the most bullish analysts on cotton prices in recent months.
“We could see a real squeeze on October, and we haven’t seen one of those in a long time,” said Dr. Cleveland. “But we could see that, and it’s time to hold on to cotton, in my opinion. I think this report speaks very well for getting the cotton market to ease back higher.”
Although the report was almost unprecedented in the amount of change it forecast, Dr. Cleveland said he believes cotton futures will have trouble getting above 68 cents. “It may have trouble getting to 68 cents. We could get into an October squeeze that could take futures above 68 cents, but I’m just not ready to go there.”
The moisture situation remains critical, particularly in the Mississippi Delta, he said. “If we don’t get a rain in the next six days, we’re going to lose a lot of cotton. We’re at the very bitter end of the growth process that’s getting ready to shut down for the rest of the year.”
Panel members John Robinson, Extension cotton marketing specialist with Texas A&M University, and H.W. “Kip” Butts, senior cotton analyst with Informa Economics, both said they thought cotton futures could get to 70 cents, depending how the remainder of the growing season and harvest plays out.
“I think we’ll get some good farmer selling when you get around that 68-cent level,” said Butts. “On O.A.’s comment that it may be tough to get there, I’m certainly in line with that. Prior to this report, I thought prices might press down a little farther into the high 50s for a long while. Now I don’t think that’s going to be the case.”
“I’m not sure we couldn’t make a run up to 71 or 72 cents,” said Jarral Neeper, president of Calcot. “From a technical perspective everything changed yesterday. Until now, I think all the mills were comfortable with this market and thinking they could buy cotton for 60 cents. Now they’ll have to do some recalculating on their needs. I think you could see a quick run-up between now and the next crop report.”
To hear a recording of these comments, go to www.agmarketnetwork.net.