Destination prices are higher on moves higher in Texas and the mid-South. Texas received about ¾” of rain late last week across most parts of the cotton belt. This is positive but growers are now looking for more rain to get the crop planted and the 10-day forecast shows no moisture. There is much concern, from all regions, that Texas growers will plant to collect insurance which they will get paid 82 cents per pound on their 10-year production average. Half the USDA’s US planted acres are in Texas. So, we are setting up for another smaller cotton year due to a high rate of abandonment.
Old crop supplies are non-existent. I’ve been preaching that destination values are at a negative margin to origin values, but now it is simply that you cannot find anything to buy. When we find an offer if is for a few loads here or there to clean out a cottonseed barn. Once again, we still have about 6 months until we see new crop supplies. Things could get very ugly over the summer.
Ginners continue to reference old crop prices when looking to sell new crop….”why sell new crop now when such a big discount to the old crop? New crop production may be smaller than the old crop.” I suppose this makes since, but, last year we front-end loaded demand when dairies bought their Oct-Mar needs early in the season at reasonable prices, $320-$340 FOB. This year they are having to start at much higher prices ($385 FOB) and demand my be significantly reduced if other commodities are available at more reasonable prices.
I expect old crop to continue higher and new crop will likely follow the old crop higher but to a lesser degree.