As of Monday 2p, Irmas track was making a beeline to Birmingham. Irma fizzled to a tropical storm when it crossed the GA/FL line, with winds of 30 mph. Rainfall for sw cotton areas suggest 3.5 on the GA crop (The Delta got 5 from Harvey, with little to no damage). Our guess is that the GA crop is 45% open by Sun, but hardly any is defoliated, which means the leaves will offer some protection from wind and rain. Irma veers to the NW and misses N Carolina and VA, but will give SC 2 to 4.
Our production estimate today is 21.3 Mb, and includes losses for Harvey, but not Irma. After all of the acreage, yield and abandonment changes, then accounting for two hurricanes, it appears this crop will be somewhere between the Aug report of 20.55 Mb, and 21.3 Mb. However, since the USDA will not account for Irma till Oct, we think the crop will be 21.0 Mb + tomorrow. Using the standard ratio of 60% of supply to estimate exports, carryout is a rather robust 6.25 Mb. If the crop settles in around 21.0 Mb, next moving target is exports. We have a lot of doubt that the US can make 14.0 Mb given the rebound in major countries, such as India.
Sales were poor last week at 119krb, with Viet high at 49krb and China in for only 6krb, a low since? Shipments were neutral at 168krb, and new crop sales were good again at 43krb. Export demand and USDA reports and the monthly ICAC SD are being ignored now, but we thought it worth a mention about the recent ICAC report. Their average annual A for new crop is 69c. The A today is 84c, food for thought. We are changing our long term view from bearish, to cotton potentially being the best short on the board for this market year.
The spot Oct, not a very widely traded horse, has reached a target of 150% of the A leg, which was from 6635 to 7243. The C leg target is 7625, compared to high Friday of 7615. Both Oct and Mar have made C legs of 150% of A. Todays downdraft took out and closed below lows of the last 3 days. Dec is back to that old support area that lasted from early Feb to mid June at 7215. Todays quick drop filled the upside gap from last week, and so far Dec is above the key 7215 level. A close below that confirms trend is back down.
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