Is Mother Nature long on cotton?
It is worth asking, as yet another hurricane threat emerges
in the Caribbean, and which is viewed currently as heading for the US cotton
belt, which has already sustained damage from Harvey and Irma, albeit not
enough to dent significantly ideas of a large harvest.
At the moment, the latest storm is just a tropical
depression, tropical depression 16 in fact, off the east coast of Nicaragua.
But it is "forecast to become a tropical storm later today",
the US National Hurricane Center said, wit the event expected to be named Nate.
The centre added that "flooding rains [are] expected over
portions of Central America" and plotting a path for the storm which would see
landfall in Louisiana, with winds of 74-100mph, before travelling north east
'Here we go again…'
Tobin Gorey at Commonwealth Bank of Australia said that "heavy
rainfall is the last thing that… crops need right now" in parts of the cotton
belt, with bolls open in many areas, a particularly sensitive developmental phase.
"And there is still plenty of unharvested cotton in the
At McCleskey Cotton, Ron Lee said: "Here we go again, and this
time it could really hurt.
"The hurricane season that never seems to end is busy again
in the Atlantic Basin, with soon-to-be Tropical Storm Nate barrelling straight
for the Gulf of Mexico with little wind shear and very warm temperatures.
And Nate is not the US cotton sector's only weather worry.
"Not only does the Mid-South and/or South East now have
another tropical system to deal with, the large west Texas crop is continuing
to deal with less-than-desirable October weather," Mr Lee said.
"Recent cold, rainy weather has been unwanted and slow to
And as an extra nugget in bulls' favour, Mr Lee flagged the 98
contracts, or 9,800 bales "to be dealt with" in New York's October cotton contract,
in its physical delivery period pre-expiry.
"The kicker is there is only 4,200 bales of certificated
stocks to be delivered. Somebody wants to take this small amount of cotton, yet
as of now, nobody has it to send them."
Mr Lee addd that "while this will likely be resolved
internally, it tells me you don't want to be short December with a late crop in
'Demand is finding
Cotton futures for December, the best-traded contract, added
0.8% to 69.32 cents a pound in New York as of 09:40 UK time (03:40 Chicago
time), crossing back above their 20-day moving average, and taking to 2.7%
their gains over two sessions.
And gains were the order of early deals in Chicago too,
where corn for December added 0.4%
to $3.49 ¾ a bushel, looking for its first winning session in four.
Midwest rains are providing some help, in slowing harvest,
and the wave of supplies to market, while boosting ideas of higher river levels
and a return to normal by barge traffic too, so crop can get to port.
CHS Hedging noted that on Wednesday "cash corn bids were
steady to higher as barge freight rates decline.
"Demand in the Gulf is also finding strength from the
receding barge freight rates," while underlining that rains have "also helped
to improve basis on the prospect of delayed harvest".
In fact, "rain in parts of the eastern Corn Belt has harvest
at a temporary standstill", and are "expected to carry through Monday", CHS
"The western Corn Belt is also wet with more rain on the way
for the Dakotas, Minnesota and northern Iowa through Saturday."
'Been down so long…'
Meanwhile, (past) dryness is growing as an issue in the
former Soviet Union, where for once yield expectations are being downgraded,
"From both sides of the border between Ukraine and Russia,
echoes are suggesting that corn production could be lower this year," Agritel
said, noting that in Russia Ikar has cut by 1.5m tonnes to 13.9m tonnes its
forecast for the country's corn harvest.
"In Ukraine, first cuts in the centre of the country, the main
region of production, are showing yields lower by 20-25% compared to last year,"
Corn gained some chart appeal too, with Benson Quinn
Commodities saying that that "technical indicators are turning a tad bit
friendly for corn", even if it was "just a 'been down so long, looks like up to
'Yields starting to
added 0.5% to $9.63 a bushel for November delivery, helped by some of the same factors
as corn, such as harvest slowdown, but with some other dynamics noted too.
Benson Quinn Commodities noted that "rumours are floating
around that yields in the later-planted beans in the east are starting to drop
off, after finding better than expected yields in the first 20-30% of harvest".
If this talk gains traction, it could be a bit of a game
changer, given the prevailing wind of upgrades in estimates for US soybean (and
corn) yields, with the likes of Michael Cordonnier, INTL FCStone and Lanworth among
upward revisers this week.
'Rumours of Chinese business'
Furthermore, Benson Quinn noted "rumours of Chinese bean
business", which would be another boost for bulls, with China, the top
importer, actually amid its mid-Autumn Festival, and with markets not expected
to reopen until Monday.
"They do need to move out coverage but with most traders out
on holiday the rest of the week, those thoughts may be premature," the broker
Still, more on the US export performance will be known
later, with US Department of Agriculture data expected to show export sales of
the oilseed last week at 1.0m-1.3m tonnes.
For corn, the
figure is expected at 500,000-700,000 tonnes, which while hardly luxuriant
would be an improvement on the 320,242 tonnes the week before.
For wheat, US
export sales last week are expected at 300,000-500,000 tonnes, roughly in line
with the 435,599 tonnes last time.
Weather is also a factor in wheat markets too – providing
ammunition for both bulls and bears.
On the bearish side, Australian rainfall is reviving a little
harvest expectations, and fuelled a 2.5% tumble overnight to Aus$278.00 a tonne
in January east coast wheat futures in Sydney.
In the US, the rains slowing row crop harvests are seen as a
boost to winter wheat sowings, which had been tested by dry ground.
"Climatic conditions are slightly improving in the US with
beneficial rains on winter wheat areas, where plantings delays could lead to
another drop of acreage setting a record of weakness for planted surfaces,"
'Rains are needed'
However, dryness fears are growing for wheat plantings in
the former Soviet Union
"Weather forecasters continue to expect dry weather in dry
winter wheat regions in adjacent areas of Russia, Ukraine and Kazakhstan," CBA's
Tobin Gorey said.
"The worry grows with time because descending temperatures
will mean poor crop establishment."
Earlier this week, SovEcon cautioned that "rains are needed"
in European Russia to support ideas of a bumper 2018 harvest.
"Weather conditions were very dry in recent weeks. In many
cases, farmers actually plant seeds in dry soil and hope for the best," the
Moscow-based analysis group said.
For now, Chicago winter wheat futures gained, but cautiously,
adding 0.2% to $4.43 a bushel for December delivery.