Before moving to the downside last week, traders looked for direction on both ends of the spectrum as cotton futures prices on the Intercontinental Exchange refused to follow the previous limit gains and instead traded either side of unchanged.
The continuing drought was still the prevailing topic of conversation among cotton market observers. Texas still is at the epicenter of a once-in-a-generation drought stretching from Arizona to Florida.
Thanks mostly to a La Niña weather pattern, the eight months from October 2010 through May 2011 have been the driest eight-month period on record for Texas since record keeping began in 1895, according to the National Oceanic Atmospheric Administration and the National Weather Service.
The crop languished in the heat as the U.S. Department of Agriculture classified 57 percent of the Texas crop to be in poor condition or worse as of July 17. Cotton plants across most of the northern and central portions of the state were withering under the strain of high temperatures, wind and no measurable rainfall.
The NOAA/NWS explained the seriousness of the situation in July by reporting that in many locations, including West Texas, it would require more than twice the average seasonal precipitation over the next three months to end the historic drought.
In other news, July 21 marked the third consecutive week that producers in Texas, Oklahoma, Kansas and New Mexico sold no cotton online. Traders said the drop in sales is due to the fact there is very little available cotton left to sell in the spot cotton market.
The USDA’s export sales report showed more net cancellations for current crop sales. Net upland sales reductions of 6,800 bales resulted as sales to Mexico, Taiwan and Thailand were more than offset by cancellations by Indonesia, China and South Korea.
Net sales of 31,200 bales for delivery in 2011-12 were mainly to China, Guatemala and Thailand.
Export shipments of 120,300 bales were up three percent from the previous week, but down 21 percent from the four-week average. Primary destinations included China, Vietnam and Turkey.
Analysts noted that global demand for cotton has been lower the past several months, but many were optimistic about the return of international buyers as well as the continuation of healthy cotton prices in the upcoming season. Both items were good news to those farmers fortunate enough to produce a cotton crop under the season’s extreme weather conditions.