In The Beginning

agricultural, Charts, Commentary, News, Technical Analysis

Today we got the end results for shipments in 17/18 and the beginning of same for 18/19. The Roll was 1.565 Mrb, and the sales total starts the year at a record 8.472 Mrb. Stunning. This weeks sales were good at 194 krb, Viet buying half as per the norm. The US needs sell only 120 krb/wk to make the target, sans a roll.

Converting to 480#/b, the 17/18 shipment is 15.877 Mb, pushing end stocks to 4.323 Mb. Using our new crop production estimate of 18.2 Mb, and exports at 14.8 Mb, carryout for both crop years is about same.

We have little confidence in any export figure tomorrow, ditto for production. Rains in TX will add perhaps Mb to the crop, maybe more. One trader surmised that tomorrows production figure will be the low for the year, and we would agree with that barring an early freeze or hurricane.

Varner View

It will be a bullish surprise if Informas estimate is proven, and a bearish surprise will come in the form of an unchanged production. At least we finally know 17/18 shipments, which took a rare downward adjustment in the 2nd best year all-time. Then there are 18/19 sales, which broke into record territory 3 weeks ago. Normal projection methods can easily produce targets near 20 Mb, taking the theoretical carryout negative. We know that cant happen, so somethings gotta change. Either sales cool down, or price does the 2011 thing, and then some.

Technicals

The dollar once again is teasing, hinting, feinting, for a breakout. This will be the 6th attempt since late May to clear the 9500 resistance, and 8th attempt in 10 months. Cotton traders know all too well about head fakes, so it is best to scrutinize closely such chart patterns before committing. Seasonal for the $ is + for a month, and our bias is that the $ will rise +9500 and continue its bull move since the Feb low. But in case of that possible head-fake, use this weeks low of 9480 as protective stop.


As always, please use protective buy and sell stops when trading futures and options.

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