Cotton: Varner Brothers

Charts, Cotton futures, Softs

High Hopes
Varner Brothers

Thought Of The Day

Member of Parliament:  “Mr. Churchill, must you fall asleep when I am talking.”  Churchill replied, “No, it is purely voluntary.”


Practically no certs (6800), visions of grandeur with China trade, and a half-full spec are all planks in this bull’s support.  Going back decades in memory, the last time we saw certs this low was sometime in the late 80s, with only 3kb in warehouses.  As we recall, futures were trading in the 50s, and one old timer said “if nobody wants the cotton, they ain’t worth diddly.”  The math seems to allow for cotton to be certificated now at +7000, but so far it really is ‘diddly.’

The romance cotton has with the China trade deal is nearly unique, as it alone has surged +25%.  The other “most wanted” commodities are soy and pork, and soy has gained only 9% from Aug low to recent high, while pork has declined 17% in a stunning rebuke to any notion China will buy in record amounts.  Go figure.

The one clear positive this market has going for it now is that the spec position has just reached what is that large middle ground between record long and short.  The thinking among bulls now is that there is much room to continue buying, and therefore they will.


Varner View

We have no idea how the public signing of the China trade deal will impact any of the commodity markets, but cotton seems to be counting on huge demand from China taking hold.  In recent weeks, demand from China has been tepid to zilch, but there is plenty of hope in bull camps to see some similarities to 2011.  This market has gone up 25% on promises, and is vulnerable to some disappointment.  New crop has pressed within 3c of the same price last year that saw plantings of 13.7 M acres.  Both ends of this market are fat and overly confident.

Technicals

Dec has reached the key 62% retrace from contract high to low at 7280.  It is also up against a channel resistance line in effect since the major low of Aug.  The wave pattern looks like a complete 5 pattern, but no reversal or top signal has been made.     Jan 13Have A Great DayCotton Traders

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