Market Outlook

David Reinbott Agriculture Business Specialist

P.O. Box 187

Benton, MO 63736

(573) 545-3516

http://extension.missouri.edu/scott/agriculture.aspx

reinbottd@missouri.edu

Trending Issues

• Volatile World

• Uncertain Chinese Growth

• Rattled Emerging Markets

• Burdensome Crop Supplies

• Weakening Livestock Markets

• El Nino Weather Threat

• Lower Incomes

• Funds Existing Ag Markets

• Strong U.S. Dollar $

Trending Issues

• Feb 9 Report – bigger crop

• World Production Increasing

• World Demand – Steady

• World Ending Stocks – Increasing

David Reinbott

February 9, 2016

Oceanic Niño Index (ONI) in previous Five El Nino years and current estimate

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

1997/98 2002/03 2004/05 2006/07 2009/10 2015/16 est

Cotton

-20

-10

0

10

20

30

40

50

60

70

80

90

100Jun

-12

Au

g-1

2

Oct-

12

Dec-1

2

Feb-1

3

Apr-

13

Jun

-13

Aug-1

3

Oct-

13

Dec-1

3

Fe

b-1

4

Apr-

14

Jun

-14

Aug-1

4

Oct-

14

Dec-1

4

Feb-1

5

Apr-

15

Jun

-15

Aug-1

5

Oct-

15

Dec-1

5

$/LB

Th

ou

sa

nd

s

Cotton Commodity Funds

Net Position

US Ending Stocks of Cotton

0.00

2.00

4.00

6.00

8.00

10.00

12.00

2005-

06

2006-

07

2007-

08

2008-

09

2009-

10

2010-

11

2011-

12

2012-

13

2013-

14

2014-

15

2015-

16

6.05

9.48 10.04

6.34

2.95 2.60 3.35

3.80

2.35

3.70

3.10

World Ending Stocks of Cotton

0.0

20.0

40.0

60.0

80.0

100.0

120.0

2005-

06

2006-

07

2007-

08

2008-

09

2009-

10

2010-

11

2011-

12

2012-

13

2013-

14

2014-

15

2015-

16

61.9 63.3 62.8 62.7

47.8 51.3

74.4

91.7

103.1 112.1

102.9

World Domestic Use of Cotton

90.00

95.00

100.00

105.00

110.00

115.00

120.00

125.00

2005-

06

2006-

07

2007-

08

2008-

09

2009-

10

2010-

11

2011-

12

2012-

13

2013-

14

2014-

15

2015-

16

115.17

122.55 121.69

108.84

119.53

115.52

103.73

107.58 109.54 110.49 110.79

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

50.0

200

5/0

6

200

6/0

7

200

7/0

8

200

8/0

9

200

9/1

0

201

0/1

1

201

1/1

2

201

2/1

3

201

3/1

4

201

4/1

5

201

5/1

6

Mil

lio

n B

ale

s

China Cotton Production and Domestic Consumption

Production

Dom Cons.

Imports

19.28

10.59 11.53

7.00

10.90

11.98

24.53

20.33

14.12

8.28

5.50

0.0

5.0

10.0

15.0

20.0

25.0

30.0

200

5/0

6

200

6/0

7

200

7/0

8

200

8/0

9

200

9/1

0

201

0/1

1

201

1/1

2

201

2/1

3

201

3/1

4

201

4/1

5

201

5/1

6

Mil

lio

n B

ale

s

China Cotton Imports

Imports

36.38%

32.44% 32.67% 34.07%

29.81%

20.65%

41.77%

54.89%

60.84% 60.61% 62.73%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

50.0%

55.0%

60.0%

65.0%

70.0%

200

5/0

6

200

6/0

7

200

7/0

8

200

8/0

9

200

9/1

0

201

0/1

1

201

1/1

2

201

2/1

3

201

3/1

4

201

4/1

5

201

5/1

6

Mil

lio

n M

etr

ic T

on

s

China to World Cotton Ending Stocks

China to World EndingStocks

U.S. Trend Line Cotton Yield

Cotton Balance Sheet

U.S. Cotton: Supply & Use

2014/15 2015/16 2016/17 2016/17 2016/17Planted Acres 11.04 8.58 9.25 9.00 9.50

Harvested Acres 9.35 8.08 7.96 7.74 7.22

% Harvested 85% 94% 86% 86% 76%

Yield 838 769 850 850 800

Beginning Stocks 2.35 3.69 3.10 3.10 3.10

Production 16.32 12.94 14.09 13.71 12.03

Imports 0.01 0.01 0.01 0.01 0.01

Total supply 18.68 16.65 17.20 16.81 15.14

Mill 3.58 3.60 3.60 3.60 3.60

Export 11.25 10.00 10.00 10.00 10.00

Total use 14.83 13.60 13.60 13.60 13.60

Unaccounted 0.16 -0.05 -0.05 -0.05 -0.05

Ending Stocks 3.69 3.10 3.65 3.26 1.59

Stocks/Use 24.9% 22.8% 26.8% 24.0% 11.7%

Ave Farm Price $0.613 $0.590 $0.580 $0.620 $0.800

2016 March Cotton Futures

2016 Dec Cotton Futures

Cotton Demand: U.S. Dollar Influence

60

70

80

90

100

110

120

130

8/1

/06

10/2

5/0

61/2

5/0

74/2

3/0

77/1

8/0

710/1

1/0

71/9

/08

4/7

/08

7/1

/08

9/2

5/0

812/1

9/0

83/1

9/0

96/1

5/0

99/9

/09

12/3

/09

3/3

/10

5/2

7/1

08/2

3/1

011/1

6/1

02/1

1/1

15/1

0/1

18/4

/11

10/2

8/1

11/2

6/1

24/2

3/1

27/1

8/1

210/1

1/1

21/8

/13

4/5

/13

7/1

/13

9/2

5/1

312/1

9/1

33/1

9/1

46/1

3/1

49/9

/14

12/3

/14

3/4

/15

5/2

9/1

58/2

4/1

511/1

7/1

5

U.S

. $ I

nd

ex

20

40

60

80

100

120

140

160

180

200

220

Cen

ts/L

b.

Nearby Futures

U.S. Dollar Index

Daily

August 1, 2006 – January 27, 2016

End of stockpiling, but…

―Quality // Auction price of reserves???

― Downside price risk depends on how fast/much they work it off.

― They’ve said that they want to release 9% over the summer of 2015.

― The lack of auction sales says little about whether reserve cotton can be spun.

New target price policy and quota policy encourages consumption of domestic cotton.

Summary China Issue: What is Impact on Cotton Imports?

How Will 2016 Be Different?

59

60

61

62

63

64

65

66

67

68

J F M A M J J A S O N D J

Daily

Cen

ts/L

b.

January 2, 2015 – January 27, 2016

Dec. ‘16 Dec. ‘15

Dec’16 futures in the same range

Maybe a half million more cotton planted acres Still a low planted acreage which is a set-up for summer weather market

El Niño winter moisture suggests good yields & low abandonment – Unless La Niña drought starts in May

China stockpile still around – capping upside, and reinforcing divergence between discounted and premium grades

All similar market influences as 2015

More of the Same in 2016?

U.S. plants 9.x million acres

Crop emerges but gets off to a slow start

On-set of very hot, dry weather raises fears of higher than expected abandonment and low yields

ICE futures might breach 70 cents, maybe even to the mid-70s in July/August… Will it last?

“Bullish” Scenario

“Cotton Spin” Column, Southwest Farm Press http://southwestfarmpress.com/author/john-robinson

CONTACT INFO

Phone: 979-845-8011

Email: jrcr@tamu.edu

Partly funded by Cotton, Inc.

The Cotton Marketing Planner Newsletter http://agrilife.org/cottonmarketing/

Twitter: @aggie_prof

Facebook: https://www.facebook.com/AgriLifeMasterMarketer

Cotton Marketing Resources

• Ag Market Network – Monthly Market Update

– http://www.agmarketnetwork.net/

• John Robinson Texas A&M

– http://agrilife.org/cottonmarketing/

• Aaron Smith – University Tennessee

– http://economics.ag.utk.edu/tnmkt.html

• O.A. Cleveland – Retired MSU

– Tim Ketcher TKetcher@rkconnect.com

– National Cotton Council

– http://www.cotton.org/

Missouri Rice Producers Conference

February 17, 2016

Time: 8:00 a.m. – Noon with Registration at 7:30 a.m.

Location: Malden Community Center

Business Hwy. 25

CEUs will be applied for

Questions? Comments?

David Reinbott

(573) 545-3516

reinbottd@missouri.edu