China and Turkey were the major buyers of U.S. cotton during the weekly reporting period, with China buying 141,500 RB and Turkey buying 111,300 RB. Increasing concerns suggest that Turkey will be in the market for more U.S. cotton this year owning to their drought reduced crop. Too, with New York under 60 cents, and the value of the dollar slipping against many major currencies, U.S. cotton only gets cheaper and cheaper.
The drought, and heat in excess of 100 degrees, has taken its toll on the U.S. crop. While a portion of the Texas crop was hit by too much rain, most of the Memphis Territory crop has suffered from heat, humidity, and drought. USDA’s September supply demand report will likely see the U.S. crop adjusted some 300,000 bales lower.
Nevertheless, the market has not reflected a declining U.S. crop. No doubt the outside markets are weighting on cotton. However, those markets in general and the other agricultural markets in particular, have regained a good portion of the losses suffered two weeks ago.
Thus, the concern is that that while U.S. exports have been strong—and will be again next week-the industry is very cautious regarding both the size and earliness of the Chinese crop. China is the home of demand!
The U.S. consumption report for July, released this week, showed mills consumed cotton at an annualized of 5.0 million bales, marking the fourth consecutive month of annualized consumption at 4.9 million bales or more. While this was significantly better than expected, it made little more than a footnote in the marketplace.
Chinese demand must hold, but December is working is way back toward 62 cents.
marketing@alchempro.com
