Words From Tom
It feels like the same song 3rd verse as May futures drops into the .77 cent range and mills dash into the market and fix on-call contracts putting a floor under a falling market. Today, Friday mill fixations chased the market back above .7800 on the May and it immediately dropped back to .7700 once the fixations stopped.
One might ask, “What does this have to do with me?” I do not have any cash cotton to sell. I am planting 3,000 acres and waiting for December to make its run to .8000! Well May and July futures have more to do with December futures than you might think. Export sells on these two months and mill fixations are propping the prices up in the high seventies on cash cotton and the mid-seventies on the December Contract. Yes exports going exceptionally well and we have dwindling supplies here in the United States.
Ok, Tom where is the stink? We still have a large global supply of cotton! Oh yeah and planting intentions come out next week. We are set to plant and produce the largest crop since 2012. When I look back (that is why my friends do not let me plow their crop.) I see a collapse of cotton prices from .8000 to .5600 and then back up to where we are today. Can we make a profit selling cotton at .7650 - .7700 cent? I know it is marginal for some producers, but profitable for most. If you have not sold a minimum of 50 percent of your crop, I would advise you to consider pricing in this .7650 - .7700 range. It has been here for several weeks, and once the squeeze is over on cash cotton, and we get the crop planted, it will have a 6 in front of it.
Other alternatives do exist. Fixing the price and buying calls or simply buying .7500 puts and putting a floor under your crop. One thing I know for sure, if you sell 50 percent of your crop, you’re going to be half wrong or half right. If you do not, you could look like a genius or you could wind up a tweeter! Hope you make the right decision for your operation.
I have had several people ask about cottonseed prices. Prices had a dead cat bounce in January and have been on the decline ever since. All feed ingredients have taken a beating with some putting in six month lows this morning. For the 2nd time in 31 years Georgia seed is trading even with Texas seed. Texas usually trades at $100.00 per ton higher than Georgia Seed. We have more seed than we can feed, crush, or export. Look for new crop seed to be cheaper than the 2016 crop.
As we get closer to planting the crop, we would like to have a customer appreciation luncheon. Please check your calendar for April 4th at 12:00 noon for the best Barbeque Dinner in the South! Please call Denna, Jon, David, or Tom and put your name on the list today.
We thank you for your friendship and greatly appreciate your business!
Yours in Cotton