What is in this article?:
- Cotton market takes battering
- Drought situation not over
- No one saw this magnitude of cotton downturn coming. Rain has also returned, and while needed and good for the crop, this combined with continued bearish economic news has really hammered the cotton market.
No one saw this magnitude of downturn coming.
Rain has also returned, and while needed and good for the crop, this combined with continued bearish economic news has really hammered the cotton market.
While recent rains have improved planting moisture and aided early development, this does little to yet alleviate the longer-term drought situation.
Rain of mostly one-quarter to 1.5-inches has been widespread over the Cotton Belt during the past seven days. Some areas have had more, especially in central and south Texas and in smaller areas elsewhere.
Prices had already begun to weaken over the past week or so due to the rain and expected improved crop prospects. But the May 10 USDA numbers added even more supply-side burdens and prices have tumbled as a result.
So, cotton has really taken it on the chin and is now backed up against the ropes. Will prices fight back and recover? The answer is, probably so.
Dropping 6 to 7 cents in 2 days is not that uncommon anymore and this may end up being an over-reaction. But the more pertinent question is how much can prices come back if they do?
Not much good can be done by panicking and selling at this point. Let’s get out of panic mode and lay emotions aside and take a closer look at the numbers.....
USDA projects the 2012 U.S. crop at 17 million bales (9 percent above 2011) based on the March planting estimate of 13.16 million acres. Because of weaker prices over the past 2 months, however, actual acres planted may come in at less than this — in the neighborhood of maybe 12.8 to 12.9 million acres. We’ll find out in the end of June report.