China comes in for 53% of sales, which is normal, but when has anyone seen Morocco stepping up for 20kb in a week? Sales were very good at 173kb, and if the new crop sales of 44kb were added, then the US sold 217kb of cotton. Pretty good demand with prices averaging 83.50c. On the macro front, 170k jobs were added against expectations of 180k. Market reaction was that this was a poor number, as something better than 200k is needed to really force unemployment down. The workforce participation rate hit a new 35 year low, which is the red meat of these numbers. Not enough people are working, or are looking.
Time is creeping into the period when a rain over most of the South will do the cotton crop no good. Cotton grown near or south of the 32 degree latitude is finished. Cotton up to the 34 lat can probably benefit a little with a rain, and especially so on the Llano Estacado.
Today’s exercise for Texas focused just on crop indexes, as opposed to the one yesterday that calculated production using just rainfall and drought indexes. Once again we looked at each district and tried to apply appropriate yields according to this week’s condition indexes. This method brought out a huge surprise, via a state-wide yield at 736 #/a and an overall production of 5.0 Mb. Abandonment was kept static at 42%. So what we have is a crop estimate using moisture numbers at 4.1 Mb, and another estimate for the same state using crop conditions that gives a production of 5.0 Mb. Something has to give, and our humble view is that the real size of the crop is somewhere in between, say 4.4 Mb.
We think the USDA has been too negative on each and every monthly report in regards to US crop size. No matter the time or conditions, the bureaucrats seem to be lowballing the crop, possibly due to having to deal with 3 years of drought in the near west. So readers of these pages can expect our figure to be above the Aug report, but we have yet to finalize this effort. Our number will be released Monday. As for market action today, cotton reminded the bears not to get overly confident or too complacent. Robust sales are getting done with Dec in the low 80s, and the trade is eager to cover shorts as mills fix prices. This is not a place to enter new shorts, and hopefully the market can muster a bounce into late Sep.
8220 is a 50% retrace from the June 2012 low to the Aug 2013 high. 8172 is the 7 month low made on 3 June. 8130 is the high of summer 2012. This coincides with the positive trend line coming off lows of June 2012 and Nov 2012. Today’s rally failed at the 200 day avg of 8380. There is strong tech support from 8225 to 8125. Look to sell a rally in the 8500-8700 area.