First, it is more about world use, than whatever happened to US supply. The May estimate started at 115.75 Mb, a gain of 2.5 Mb over year ago, and 4.5 Mb over two years ago. Now world use is 119.2 Mb, rising faster than any other commodity. This is 5.3% over year ago, and 6.3% over two years ago. And to boot, this year is 17% above that of the low of 11/12, and 3rd best all-time. No other row crop world usage is growing this fast, even the hot soy market.
As for US numbers, we took the production as a rather large surprise, moving up rather than down. Private and in-house and secret estimates were much smaller than the cluster of unchanged numbers on the survey. Several private estimates were around 20.0 Mb, one at 19.75 Mb. This report should have taken into consideration all of the hurricane issues, and some or all of the freeze. The crop could still be cut a little, but this thing is pretty set at 21ish. That export number did not budge, and is now 60% exactly of available supply. There is safety at the moment in that number, but this could change much. Carryout at +6 Mb is not a bullish number, but the market seems focused on world demand and is looking for higher exports.
We have been listening to and hearing about missing stocks theories for over 18 months, so allow us to start one of our own. Can the rapid rise in world consumption be attributed to the USDAs desire to do something incrementally to compensate for this never-ending theory? We have seen at least two historical revisions in past decades whereas the USDA raised consumption over several years to account for higher use, so now are we seeing a higher use as compensation for missing stocks? As Slim Pickens often said, What in the Sam Hill is going on round here? There is a full-fledged boom going on in cotton consumption, at the same time China is destocking its record inventory. How timely. Grain markets behaved negatively. Cotton will too, in time.
Momentum is trying to roll over, but this has wiggled around as much as price in recent weeks. Volume has been rather large the last two days, right in front of option expiration. Refer to commentary on chart below for other tech ideas.