Cotton Steams Ahead, Could Corn Be Next?

July 18, 2016 12:00 PM

Cotton prices appear favorable for U.S. producers going forward as China replaces its reserves, says Craig VanDyke, Top Third Ag Marketing. Part of the momentum is the result of production cutbacks by India, the world’s top cotton producer, which has cut production by a third this year. 

“Cotton has really been on an upside trend since March,” VanDyke tells “AgDay” host Clinton Griffiths on the Agribusiness Update segment. “This last week has just gotten exciting: a limit-up move during the week, another 4 cents higher in the overnight after that. The cotton market has caught some steam thanks to USDA.”

VanDyke points out USDA adjusted production higher just as export demand soared higher.

“Technically, we put an outside up year on the monthly charts for December cotton, which is a very big move. [It’s] definitely a train I’d be cautious getting short in front of,” VanDyke explains. “We’ve seen years before where cotton has just skyrocketed. Whether or not we’re going to have a similar type year … I don’t think it’s going to get that exciting here. But you start to get to that 80-cent level, 90-cent level, I definitely think it’s attainable as long as we can keep the steam going here.”

Meanwhile, corn has seen a “huge” price drop in a short period of time, though the future appears brighter based on the December chart, VanDyke says.

“That 50-day moving average is also conveniently around the 50% retracement,” he says. “That number is around $3.97 to $4. Now if we get perfect weather moving forward, if this wheat market does stay heavy, it might not be as easy. But we’ve reached that 50% retracement within one month for the past year. So [we’re] definitely looking at some potential upside. We’re finding some value in current corn prices, not to say there isn’t 20 to 30 cents of risk here in the near term. But I think there’s some potential for this market to catch some steam.”

Click the play button below to watch the complete “AgDay” interview with VanDyke.

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