May Is Loved

agricultural, Charts, Commentary, News, Technical Analysis

One gov source says China acreage will be down 4% overall, but will increase 0.5% in Xianjiang. Thats a tight number, but the Army controls acreage there so it must be a good number. Sales from Chinas reserves have drifted from 95% to around 50% offered. News out of India is not nearly so precise, as a few weeks ago acreage was said to decline over experience with Bt seed. This week the news is different, with Indian merchants eager to step up new crop shipments to China, and to the ROW. They see the tariffs issue as opening the door for their supplies. A bigger issue is whether Indian farmers will swallow hard and pay for new, licensed Bt seed, or choose to grow other crops.

Yet more evidence that humans should not buy and wear textiles made from petroleum derivatives. A study in Australia on the Great Barrier Reef shows a primary source of pollution is synthetic fibers coming from washing those shiny, plastic feeling, skin-irritating clothing articles. Natural fibers made from wool, cotton, etc, break down and pose no threat to the reef. Readers of these pages should wear more cotton, save the reef, and ones own skin.

Varner View

It looks like the same crew that took notices off March is in there for May. Certs have risen from a puny 47kb to a still small 73k, just as decerts have come back. The H/K spread has raced from -45 to +90, the same level it traded at the end of Mar notice. Only the May gets the love, as July has maintained a range against Dec in the last few weeks. Usually cotton goes down into notice, then rallies, but this time May has bounced 6c from the early Apr low. May open interest is falling by buckets, and with todays option expiration, will be in the mid 30s come Mon. Specs and hedgers should steer clear of May from here on.

Technicals

There is some correlation between near term cotton direction and that of grains and the stock market. But not so for the $. Seasonal for the $ is negative to first week of May. Checking charts back to 1998, the $ has been very reliable in making minor, or intermediate, or major lows in early May. Our bias is that the low on 2/16 completed the bear market, but since mid Jan the dollar has meandered back and forth in a 3c sandwich. Regards cotton, a close below Thursdays low in July, 8271, would tip momentum back down.

 



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