This could finally be the year when India breaks through the powerful resistance of 1 bale per acre yield. The last 7 years have been abysmal for India, with an average yield of only 455 #/a. It seems as if a rotating drought through all of the major production areas have kept a lid on production. This may finally be that year when Mother Nature allows the world’s worst farmers to get their act together. What would happen if India shattered the 1 bale mark, and posted something around trend yield of 515 #/a. Harvested acreage of 29.6 M would mean production of 31.75 Mb. That’s 3.75 Mb above the most recent USDA report, and is ironically about the same amount of cotton that Texas has lost due to its 3 year drought.
The Cotton Crop Assessment Committee in Pakistan has taken the production estimate down ½ Mb…….Polyester prices have jumped up a bit on the back of surging crude markets, with benzene +10% off the summer lows………..
Varner View
Long liquidation by specs and funds is pushing into some resting buy orders from mills below 8400. This buying has been there all summer and heats up around 8300. So even if specs and funds decide to begin a larger liquidation, mills will be there to scoop up cotton at prices that are $50/bale cheaper than just a couple weeks ago. Hopefully this means a dull market for a while, something we need. Sell rallies.
Technicals
The 200 day avg is at 8350, with better support at 8170 and 8130. If Dec moves below 8200, advise covering shorts and watching for a bounce.
