2-Day Cotton Hedging Seminar in Hong Kong, Oct 30-31

Learn to add value to your cotton trading or procurement by implementing a controlled hedging program. This workshop will introduce ways to help monitor and offset risk. As you learn the techniques and instruments, we will study examples to observe how a risk management plan is implemented.  We will also cover basis risk, spreads, and options as you learn good record keeping and accounting for your cotton program. Click here to download the flyer or register to attend now.

USDA Postpones Release of Regular Crop Progress Report

Release of today's regularly scheduled 4:00 p.m. weekly Crop Progress report as well as the 3:00 p.m. Turkey Hatchery, Hatchery Production Annual Summary, and Potato Stocks reports from the U.S. Department of Agriculture's Agricultural Statistics Board (ASB) are delayed. We expect the USDA to release the reports tomorrow, Tuesday April 17, at their previously scheduled times.

The delay is a result of power and server outages in the USDA Washington, DC headquarters affecting National Agricultural Statistics Service offices across the country. If there are any changes in the revised release schedule, the ASB will issue an official public notice in advance of the release time.

One-Day Cotton Hedging Workshop, April 24

Join us in Bangkok for an all-day seminar focused on minimizing cotton risk by implementing a regimented hedge program. Explore different hedge tools available that can add significantly to current procurement and/or sales strategies and explore how a well-managed hedge program can work, especially in a challenging environment like last season. Click here to view the program and details of the session and click to here register before the session fills.

Weekly Commodity Market Recap: Cotton

Last week saw ICE cotton futures jump to their highest weekly close in two months, propelled in part by a weaker dollar and tentative prospects of improving downstream demand. Nearby futures leapt 389 points for the week to settle Friday at 93.52 cents/pound, the biggest weekly advance since the start of the year. While futures sagged only modestly Thursday and Friday, this softness did snap a streak of six gradually higher closes for the market.

Some of last week’s firmer prices rested on more signs pointing to pockets of improving demand across the global textile supply chain. While the market remains a long way from shaking off the full impact of the global destruction of demand that has gripped the supply chain the last few years, green shoots of improving demand suggest a return to modest growth may be close at hand. Most recently, Chinese cotton yarn imports benefitted from higher demand and lower unit costs to expand to a record high in February. Also last week came improving indicators of faster growth in 2012 retail demand for the largest markets in both Europe and Latin America. If these signals take root and spread, global mill demand for cotton may rebound in 2012 as well. Additionally, weekly U.S. cotton exports continue to outpace the average volume needed to reach the USDA’s forecast of 11.0 million bales, suggesting this target may be revised higher soon. Traders’ positions reflect this creeping optimism, as the weekly CFTC report showed Managed Money went from a net short position of over 10,000 contracts the previous week to a net short of just 948 contracts as of last Tuesday.

But partially offsetting some of this enthusiasm is a handful of bearish indicators. First, after touching a seven-week high Wednesday, futures retreated Thursday and Friday, in part owing to a bigger-than-expected Prospective Plantings report from the USDA. The area sown to cotton in the U.S. this spring is expected to reach 13.2 million acres. While this area is 11% less than last year, it is more acreage than many expected, hinting the harvest size may be somewhat bigger than first anticipated, assuming trend yields and abandonment. Additionally, while there are glimmers of hope for Thailand’s beleaguered fiber and textile supply chain later this year, the industry continues to reel from dull demand and last year’s record flooding. And other disappointing signs hint the Spanish apparel market—one of the five biggest in Europe—may go from bad to worse later this year. But perhaps the biggest weight to loom over the market may be the recent suspension of China’s cotton reserve procurement program. This effort effectively propped up Chinese—and by extension, global—cotton prices over recent months. But with no more procurement until the new harvest arrives, the near-record divergence between Chinese and foreign cotton prices may narrow, perhaps with Chinese prices easing to close the gap. Following Wednesday’s near-term high, cotton prices have stalled and there is little sign that demand is rising to meet the market. In fact, commercial traders report little inquiry in the aftermath of the recent rally. The fallout of no more Chinese Reserve purchases may color the market until more attention turns to weather developments as Northern Hemisphere plantings soon commence in earnest.

Questions over Chinese Cotton Imports

A contact heard recently that China purchased Indian cotton, but not for the State Reserve, and asked if we agreed or disagreed.

Yes, we agree that China purchased Indian cotton, but not JUST for reserve (that too) and not JUST Indian growths. Much of the cotton imports of late has been for consignment stocks in China that will be looked over & bought by local mills later.

The big purchases by China (February was second-biggest import month on record) was of Indian, U.S., and Brazilian…India didn’t have all the fun. The U.S. shipped more cotton to China in Feb than any month in nearly six years. What’s more, these big purchases of Indian cotton prompted all the panicky Chicken Little on-again, off-again policy vacillation in India over the cotton export ban. The 800-lb gorilla continues to exert its influence over the global cotton market.

Weekly Commodity Market Recap: Cotton

ICE cotton futures finished Friday with another close lower, but still managed to rise for the week following Monday’s surprise limit-up move. Friday’s 76-point tumble in the Nearby capped four straight days of erosion in the May contract, but the combined 343-point loss over this period still did not fully offset Monday’s surprise 400-point surge. The curious turn in market prices shadowed a curious turn in breaking news last week. The big developments for the week that impacted the market were Indian policymakers vacillating over cotton exports followed by a generally bearish WASDE forecast for the U.S. and world cotton balance sheets.

First, early last week India announced an immediate export ban on cotton, whether or not the bales already had been registered for shipment. Apparently, the world’s second-largest cotton exporter has shipped substantially more cotton abroad than first anticipated, leading local the textile industry to worry that sufficient domestic cotton soon would be in short supply. In an ironic twist, large exporters are rumored to have shipped substantial volumes of local cotton to foreign warehouses in anticipation of the very export ban government officials say the shippers caused. The decision appears to have been made unilaterally without conferring with all domestic stakeholders, including India’s own Agriculture Minister. Understandably, the news threw markets into disarray and prompted howls of criticism, with local prices plunging while global and U.S. cotton prices rocketed ahead to start the week

But later in the week, the March WASDE provided its own fireworks, with surprise bearish adjustments to the balance sheets for both the U.S. and the globe. On the domestic front, despite strong evidence pointing to lower U.S. cotton exports, the USDA left this projection unchanged at a lofty 11.0 million bales. Instead, the USDA pared back its domestic cotton consumption forecast by 100,000 bales to just 3.4 million bales, the lowest in more than six decades. Worldwide, anticipated ending stocks jumped 1.55 million bales from February to 62.3 million, within a whisker of the record set five years ago. This adjustment eased the projected global stocks-to-use ratio to its loosest in a decade, weighing on price prospects later this year.

Lastly, the market was sent into another bout of disarray as Indian policymakers decided to move the goalposts again, not just once, but three times since Friday. First, prior to a meeting of cabinet ministers Friday to review the recent export ban, the Director General of Foreign Trade announced that cotton that had already cleared Indian customs by March 4th could be exported. Then Sunday Trade Minister Anand Sharma said the government had decided to fully roll back the ban, an apparent about-face from less than a week ago. However, Monday Trade Secretary Rahul Khullar announced the government won't accept new export registrations until it completes a review of recent exports and applications. This wavering indecision continues to roil markets and does little to boost the already-damaged reputation of India as a reliable cotton shipper.

Combined, the streak of declines Tuesday through Friday coupled with today’s intraday losses more than offsets last Monday’s limit-up jump on the ICE, suggesting the bears continue to maintain the upper hand over recent weeks. Since approaching medium-term resistance near $1.00/pound in mid-January, futures gradually eased lower, shedding roughly thirteen cents and presently stand near their lowest levels so far this year. If projected fundamentals for this marketing year continue to erode as we expect and there are no more policy surprises, the cotton market may be poised to ease lower as spring plantings approach and attention turns to weather developments for the new crop.

INTL-FCStone International Agricultural & Economic Forum April 25 – 27

This international forum will explore intermediate and long-term insight into the economic, energy, maritime freight, foreign exchange markets, weather and agricultural products, with global and regional focus for those seeking insight into strategic decision making. Click here to view the agenda and a list of speakers or to register.

Will Indian Cotton Export Ban Boost Prices again?

Following today's export ban by India, the question many are asking is if this move could be enough of a driver to propel prices to approach last year's highs.

In short, no, we do not see India’s suspension on cotton exports as enough of a catalyst to propel cotton to another rally similar to the 2010/11 surge that peaked well over $2.00/pound. Certainly, India is the second-largest producer and exporter of cotton in the world, and this move is likely prop up prices, if not give a boost to the market. But global fundamentals are quite different this year vs. last year and recent momentum was pointing to looser fundamentals ahead, unlike prospects for gradually tighter fundamentals witnessed about 1.5 years ago. What’s more, last year’s spike was the culmination of a ‘perfect storm’ of bullish ‘waves’ that all crashed together at the same time. These included tighter U.S & global balance sheets, record volatility, record backwardation, an unprecedented short squeeze in the U.S., and the weakest dollar in years, among a few. Today’s market certainly reflects a much different landscape.

Perhaps most importantly, today’s soft demand across the global textile supply chain is likely to keep cotton reined in well short of last year’s spike above $2.00/pound, regardless of India’s latest policy move.

Weekly Commodity Market Recap: Cotton

Cotton markets in the U.S. and around the world edged lower again last week on persistently weak demand prospects, but two new policy moves could limit downside potential well into the spring. ICE cotton futures shed 192 points for the week to settle at 88.23 cents per pound, the lowest weekly close since mid-December. Cotlook ‘A’ Index prices, a proxy for world cotton prices, dipped 70 points from a week earlier to 97.45, the lowest since the start of this year. While sentiment is gathering steam for lower Northern Hemisphere cotton plantings this spring, the demand side of the balance sheet continues to weigh on the global cotton market.

This weakness is spread both geographically and across the supply chain, from East to West and from yarn spinning to retail sales. Most recently, mills in Thailand and South Korea reported another month of soft demand for their textiles, suggesting cotton consumption forecasts for both markets are overstated. Owing to record unit costs and weak foreign demand, Pakistani exports of cotton fabric sank the most in years in January, with volume plunging to the lowest January in more than a decade. Even retail was not immune. While some markets reported upbeat sales, others—like Italy—saw a disappointing December shrink garment sales for the fourth straight year. Until price pressures ease across the breadth of the supply chain and retail demand in several key markets shows sustained signs of a rebound, upstream textile output may remain restrained, weighing on cotton prices.

But at the same time, two new policy developments could help prop up global cotton markets, offsetting some of this bearish weight looming over the market. First, Thursday China announced it planned to boost the Reserve procurement price for cotton starting this autumn. Many believe the move is to partially offset what is likely to be a widespread decline in Chinese cotton plantings this spring. While only a modest 3% increase from the current procurement price to 20,400 yuan per ton ($1.47/pound), the implication is that spot and forward market prices in China—and by extension, around the world—may remain firm through 2012 as well.

The second policy development came Monday from India’s Directorate General of Foreign Trade (DGFT), announcing an immediate suspension of Indian cotton exports. While rumors circulated for days that this move was imminent, the announcement plunged local Indian prices while helping propel ICE cotton futures limit up in early Monday trading. While some in India welcomed the move, others called it regrettable. The perceived rash move is reminiscent of what the market saw almost two years ago when India—the world’s second-largest cotton exporter—last tinkered around their cotton trade policy. Doing so this year—with Chinese mills now as major buyers—could give another black eye to the reputation of the Indian shipper on the global market. Over the last two years, Pakistani mills bore the brunt of the cancelled Indian shipments. But this year it will be the Chinese left empty-handed. We suspect these jilted spinners may not soon forget, suggesting increased inquiries to U.S. merchants & co-ops at a time of relatively thin uncommitted exportable supplies.

Weekly Commodity Market Recap: Cotton

Domestic and global cotton prices trickled lower last week, burdened by weighty prospects for weaker cotton textile output in India and expectations of bulging global inventories of the fiber by the end of the next marketing year. At 87.48 cents per pound, ICE cotton futures Thursday touched their lowest so far this year before rebounding modestly Friday. Prices across every contract month retreated for the week, with several touching their lowest weekly settles so far this year. Foreign growths also joined the slide, with the ‘A’ Index tumbling 120 points Friday to a seven-week low of 98.15 cents. In China ZCE cotton futures sank across all contract months again Friday, with several reaching the lowest settles in more than six weeks. Total open interest expanded for the fifth straight session, stretching to a five-month high. The hemorrhaging also continues unabated for a range of Indian spot quotes, down sharply last week to the lowest levels this year. The widespread—if relatively modest—erosion in prices around the world last week reflects mounting bearish evidence hinting at looser balance sheets, both this marketing year and next.

Two key fundamental drivers impacting the market last week were from India and the USDA. First, early in the week came news that Indian cotton yarn production sank again in December, down -16.1% from a year earlier, the eighth straight month of double-digit year-over-year losses. This disappointing contraction in output confirmed 2011 as the worst year in at least a decade for the local cotton spinning sector. What’s more, the plunge reinforces our earlier view that cotton consumption forecasts by the USDA and India’s Cotton Advisory Board remain too generous. If these projections are whittled lower in coming months, Indian and global balance sheets for the current marketing year are likely to loosen, pointing to softer prices ahead.

The second key news for the week came from the USDA’s annual Agricultural Outlook Forum held near Washington, DC late last week. While unofficial, a tentative new-crop global balance sheet presented by USDA economists indicated world cotton production was likely to outpace mill demand for the third straight year in 2012/13. If so, ending stocks by the conclusion of the next marketing year are likely to rise, perhaps to a record 64.8 million bales. If this projected balance sheet comes to fruition, it will denote the loosest global fundamentals in eleven years, implying softer prices may lie ahead in 2012/13. Indeed, in a speech at the Forum, USDA Chief Economist Joseph Glauber expects crop prices to fall in the new marketing year, with cotton averaging 80 cents per pound. With futures presently closer to 90 cents and ‘A’ Index quotes even higher, last week’s erosion in price may be only a modest, early slip in a more protracted tumble to much lower prices later in 2012.

INTL FCStone 2nd Annual Agricultural & Economic Outlook Meeting: March 1 & 2, 2012

Managing the commodity price risk demands insight into many different segments of the commodity world. This Market Outlook meeting will enable attendees to explore both domestic and international issues affecting markets for the upcoming crop year. Click here to view the agenda and list of speakers or to register.

A Peek Behind the Curtain at USDA Balance Sheet Forecasts for Cotton 2012/13

For an early, unofficial peek @ USDA's 2012/13 cotton balance sheets for US, China, & world, please see http://goo.gl/z2APj. USDA cotton economists echoed USDA Chief Economist Joe Glauber yesterday, saying A-Index is expected to average between $.80-$1.00/pound in 2012/13. Good stuff starts after pg 10. Enjoy!

FCStone Annual Outlook Conference: June 15-16, 2011

The 2011 INTL FCStone Outlook Conference focuses on examining supply and demand factors in uencing every major food-related commodity, as well as price in uencers such as interest rates, energy, currencies, governmental legislation and regulations, and global weather patterns.

This year's theme is "The Most Important Subject on Earth," an acknowledgment of the critical importance of food, at a time when political and economic disruptions, rising energy prices and controversial new technologies are bringing food supply and demand issues to the forefront of
the global agenda.

The continuing turmoil in the Middle East — exacerbated at least in part, according to many commentators, by food shortages and rising food prices in the region — will be addressed by the conference's keynote speaker, Shahar Arieli, Deputy Consul General of Israel to the Midwest.
His keynote address will help conference attendees understand what's happening in the region, and how various scenarios are likely to a ect food and energy prices in the months and years ahead.

Representatives from major U.S. and European exchanges will discuss new developments in global risk management tools. The influential market analyst David Hightower, publisher of The Hightower Report, will present his global financial outlook. Hightower, who has been a market analyst for more than a quarter century, is a frequent guest on CNN and Bloomberg TV. David Oppedahl, an economist for the Federal Reserve Bank of Chicago, also will offer a macroeconomic perspective on the U.S. and global economies.

For the full agenda or to register to attend, click here for more: http://www.intlfcstone.com/seminars/outlook/Pages/default.aspx