One of the two steady pillars for the bull has become a little shaky. Varying forecasts for W TX next week show anything from to 1.25, as opposed to nothing just a few days ago. Two previous forecasts fizzled as the event arrived. A few merchants indicate hints and signs of demand that is falling from red-hot to hot, to medium. Our guess for combined sales tomorrow is 375 krb, and less next week.
We have gotten all twisted up with figures for new crop, as the situation in TX is very confusing. Districts 1N, 1S and 6 are in extreme stress, while districts 8S, 10N and 10S are in some stress. All others are in very good shape, as is just about all of the country. Currently our production for new crop is all over the place, and we will crank out a new one shortly. This is complicated, but much easier than estimating new crop shipments.
One more thing, very important for famers. Dec is 25c ABOVE loan. Huge risk to remain unhedged.
Varner View
What fun it is to crank out estimates in front of the first 18/19 report, when all is up in the air. Our guess is that the USDA will keep on pushing up world consumption, as it has increased 18 Mb in 6 years, so why not another +3 Mb? World production should come in lower, as there has been much conjecture about Chinese and US yields moving a little lower, and the revulsion India is going through over paying for Bt seed. The US production should reflect current conditions in TX, but what about the very positive conditions elsewhere? Then for shipments, if they use the standard 60% of total supply to estimate exports, it will look like a low figure. Since all of the numbers will be so fluid tomorrow, perhaps the real market maker will be in the sales. We will look for another place to buy July puts.
Technicals
Momentum is negative, as is the seasonal. Trend remains positive. A year ago cotton made a major high on 5/15, then declined 17c in 5 weeks. If volume had been high Tuesday, it would be an easy call for a top. As it is, there is now a triple high in the 8750 area.
As always, please use protective buy and sell stops when trading futures and options.
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