Among Other Things

agricultural, Commentary, News, Technical Analysis

Reading maybe a dozen press accounts on the China trade talks, we cant find a single one that expresses pessimism. All seem optimistic, or very much so, that the trade talks will result in a rising stock market, and large purchases of US ag products. Maybe it all works out that way, but when reading the numerous, thorny issues being discussed, this thing is going to be with us for a while. Among other things, the US wants specific amounts for purchases and dates; clear license authority; environmental regulation clarity; and a complete list of subsidies. Good luck with all that, and more. Our humble view is that these trades talks will be hanging around for months before being resolved.

Weather sources show W TX has several days with high chances of rain into 1/22. The rest of the South doesnt need rain, but will get it.

Varner View

The Cotton Grower acreage survey showed overall acres down 400k, very surprising. But when one sees that GA (-300k) and TX (-500k) are the big losers, it then becomes an issue of how much is real, and how much is disgust over last years troubles with Mother Nature. Texas got walloped for 40% abandonment, and GA was hit by hurricanes and an endless wet fall. A lot of farmers lowball acres when last years crop was disappointing, and for those 2 states it bordered on disaster. Other states showed increases due to cottons profitability, those being NC (+55k), Ark (+40k), LA (+45k), MS (+175k), TN (+30k), KS (+55k), and OK (+45k). We dont necessarily agree with the acreage drops in TX and GA, but will run some spreadsheets with the survey acreage in coming days. We are flat, looking for more bounce.

Technicals

Nothing new for cotton, here are a few thoughts on the $. The spot chart has broken below a positive trend line crossing lows in Apr, Sep and Dec, and has sliced through the 89 and 144 day avgs, both key long term indicators. Todays close was below 9550, lowest level since late Oct. Our long term view is that the $ completed a B leg top in Dec, and the major C leg correction is underway.



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