The health of crops in the U.S. is strong, which bodes well for supplies considering the nation is the world's top shipper of the soft commodity. Regions of top-growing state Texas endured strong rains during the past eight weeks, which nourished plants and closed a drought.
The U.S Department of Agriculture forecast cotton production in the U.S. will rise 16 percent during the season beginning August 1 as compared to the same period one year earlier.
"We're going to have a very good crop, and that's a problem," president Mike Seery with Seery Futures in Plainfield, Illinois told the news source on Thursday. "The market doesn't have any good fundamentals, there's just going to be a lot of supply."
With a record price of $2.197 per pound as established in March 2011, cotton futures have dropped roughly 11 percent thus far this year.
Global supplies likely to rise
World supplies of the soft fiber will climb following strong production in the U.S. China is poised to gather its top supplies ever as a result of strong production, according to data released by the Agriculture Department.
On Wednesday, prices of cotton futures were 21 percent lower than the highest settlement from earlier this year, which was 94.75 cents per pound. That officially pushed cotton futures into a bear market.
The federal agency also noted that farmers in the U.S. are likely to gather 15 million bales of cotton this year, which represents an increased from the 12.91 million bales that they collected in 2013.
Prospects for cotton demand remain in doubt after economic data earlier this week indicated gross domestic product shrank 2.9 percent during the first quarter of this year.
"To have the economy shrink like that indicates that things are slowing down," president Sid Love with Sid Love Consulting Services in Overland Park, Kansas told the news source on Thursday. "It isn't necessary for consumers to buy clothes or a new pair of jeans. This will have an impact on demand."
Australian demand to surge
But demand for the soft commodity in Australia is forecast to be strong.
The Land reports Cotton Australia signed on to a pact that might aid growers of cotton in the South Pacific nation access the international market. The deal with the Better Cotton Initiative aims to benefit the country's cotton-growing sector.
Cotton Australia said the involvement of growers of cotton may be at the level they choose. The top official said the pact bodes well for both Australia and the wider cotton sector.
"This agreement recognizes Australia's leading role in the production and promotion of responsibly grown cotton," chief executive officer Adam Kay said, according to The Land. "Access to future growth markets is of tremendous importance to Australian cotton growers, particularly as they contend with competition from synthetic fibers."
Slow demand pressures prices in Southeast Asia
In Southeast Asia, the price of cotton was being pinched by slow demand, The Dawn reports.
India has endured monsoon rains that might have damaged some crops. In Pakistan, the Karachi Cotton Association slashed spot prices for a second consecutive trading session on Thursday.
The price of cotton also has suffered as a result of losses that the Chinese yuan has suffered. Considered one of the stronger-demanding nations, China has seen its monetary unit lose value. In turn, that reduces the pace of of shipments of cotton yarn to the Asian nation from Pakistan.
Exports of the Pakistani product to China have increased in price as a result of losses that the renminbi has endured, cotton analyst Naseem Usman told the news source.
THIS MATERIAL IS CONVEYED AS A SOLICITATION FOR ENTERING INTO A DERIVATIVES TRANSACTION.
THIS MATERIAL HAS BEEN PREPARED BY A DANIELS TRADING BROKER WHO PROVIDES RESEARCH MARKET COMMENTARY AND TRADE RECOMMENDATIONS AS PART OF HIS OR HER SOLICITATION FOR ACCOUNTS AND SOLICITATION FOR TRADES; HOWEVER, DANIELS TRADING DOES NOT MAINTAIN A RESEARCH DEPARTMENT AS DEFINED IN CFTC RULE 1.71. DANIELS TRADING, ITS PRINCIPALS, BROKERS AND EMPLOYEES MAY TRADE IN DERIVATIVES FOR THEIR OWN ACCOUNTS OR FOR THE ACCOUNTS OF OTHERS. DUE TO VARIOUS FACTORS (SUCH AS RISK TOLERANCE, MARGIN REQUIREMENTS, TRADING OBJECTIVES, SHORT TERM VS. LONG TERM STRATEGIES, TECHNICAL VS. FUNDAMENTAL MARKET ANALYSIS, AND OTHER FACTORS) SUCH TRADING MAY RESULT IN THE INITIATION OR LIQUIDATION OF POSITIONS THAT ARE DIFFERENT FROM OR CONTRARY TO THE OPINIONS AND RECOMMENDATIONS CONTAINED THEREIN.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE. THE RISK OF LOSS IN TRADING FUTURES CONTRACTS OR COMMODITY OPTIONS CAN BE SUBSTANTIAL, AND THEREFORE INVESTORS SHOULD UNDERSTAND THE RISKS INVOLVED IN TAKING LEVERAGED POSITIONS AND MUST ASSUME RESPONSIBILITY FOR THE RISKS ASSOCIATED WITH SUCH INVESTMENTS AND FOR THEIR RESULTS.
TRADE RECOMMENDATIONS AND PROFIT/LOSS CALCULATIONS MAY NOT INCLUDE COMMISSIONS AND FEES. PLEASE CONSULT YOUR BROKER FOR DETAILS BASED ON YOUR TRADING ARRANGEMENT AND COMMISSION SETUP.
YOU SHOULD CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR CIRCUMSTANCES AND FINANCIAL RESOURCES. YOU SHOULD READ THE "RISK DISCLOSURE" WEBPAGE ACCESSED AT WWW.DANIELSTRADING.COM AT THE BOTTOM OF THE HOMEPAGE. DANIELS TRADING IS NOT AFFILIATED WITH NOR DOES IT ENDORSE ANY TRADING SYSTEM, NEWSLETTER OR OTHER SIMILAR SERVICE. DANIELS TRADING DOES NOT GUARANTEE OR VERIFY ANY PERFORMANCE CLAIMS MADE BY SUCH SYSTEMS OR SERVICE.
GLOBAL ASSET ADVISORS, LLC (“GAA”) (DBA: DANIELS TRADING, TOP THIRD AG MARKETING AND FUTURES ONLINE) IS AN INTRODUCING BROKER TO GAIN CAPITAL GROUP, LLC (GCG) A FUTURES COMMISSION MERCHANT AND RETAIL FOREIGN EXCHANGE DEALER. GAA AND GCG ARE WHOLLY OWNED SUBSIDIARIES OF STONEX GROUP INC. (NASDAQ:SNEX) THE ULTIMATE PARENT COMPANY.