PCCA Cotton Market Weekly
March 8, 2024
May futures finished the week ending March 7 limit-up after trading lower early in the week.
- Profit-taking and corrective action caused the early week decline, sending the front months in cotton limit-down at one point.
- Trading ranges were wide, but cotton news was quiet overall in anticipation of the WASDE report.
- May futures had another week of volatile trading but eventually settled at 99.28 cents per pound, down 29 points for the week.
- Despite the losses early in the week, total open interest added 1,956 contracts, increasing to 272,742.
- Certificated stocks were reported at 20,886 bales, reaching the highest level since December.
The U.S. balance sheet tightened when production cut 330,000 bales to 12.1 million bales on Friday’s estimates of supply and demand (WASDE report).
- U.S. exports were unchanged at 12.3 million bales, but the cut to production caused ending stocks to decrease by 300,000 bales to 2.5 million bales.
- World consumption increased 480,000 bales to 112.94 million bales.
- The global balance sheet tightened up as well. World-ending stocks decreased by 360,000 bales to 83.34 million bales.
The stock market recorded another week of significant gains, building on recent rallies.
- Fed Chairman Jerome Powell testified before Congress this week, saying they have gained greater confidence that inflation is moving in a sustainable direction.
- The European Central Bank held interest rates steady, but it is speculated they could cut them this year.
- The S&P 500 hit a new record, fueled by interest rate expectations and a slew of jobs data.
- Congress was poised to pass a funding package on Friday that will provide funding to six departments, including agriculture.
- The Labor Department reported that U.S. employers added 275,000 jobs in February, a signal that the labor market remains robust.
- The U.S. unemployment rate rose slightly by 0.2% to a rate of 3.9% but remains low historically.
Demand for U.S. cotton is still weak, but the Export Sales Report for the week ending February 29 was relatively good overall.
- A net total of 52,000 Upland bales were sold. With the recently higher prices, many did not expect this week’s sales to be higher than the 40,000 reported last week.
- Bangladesh was the biggest buyer, booking a total of 34,300 bales.
- Cancellations of 60,000 bales, mainly from China and Pakistan, were a noticeable feature in the report.
- A total of 330,800 Upland bales were exported, surpassing the pace needed to reach USDA’s export estimate.
- A net total of 11,100 Pima bales were sold, and 6,400 bales were shipped for the week.
- New crop sales of 15,100 Upland bales increased from last week but are below average for this time of the year.
The Week Ahead
- Now that planting has started in South Texas, weather will become the central focus as many traders’ attention has begun to pivot to next season’s crop.
- From a fundamental standpoint, next week should be quiet in the cotton market. The weekly Export Sales Report and growing certificated stock will continue to be monitored.
The Seam
As of Thursday afternoon, grower offers totaled 29,425 bales. On the G2B platform, 31 bales were traded during the week, with an average price of 74.00 cents/lb. The average loan was 43.55 cents/lb, bringing the average premium received over the loan to 30.45.
