Record Volume

agricultural, Charts, Commentary, News, Technical Analysis

The rise in exports to 14.5 Mb was definitely a bullish event, but was well expected. What is not bullish, and downright confusing, is the cert stocks figure climbing over 350k. If demand is so high for export cotton, why did 33kb get tendered right during the spike to 88c? Another confusing part of this market is the basis. The word that can best describe the basis during this explosive price move is normal. Our guess is that the price spike will usher in some cancellations, which are likely happening now, but wont show up for a while. This market is moving so fast that it is taking care of a tight old crop carryout in just a few days.


In a more sane and dull arena, weather in India/Pakistan is looking pretty good, as the monsoon is actually going to be early this year. Heavy rains hit islands several hundred miles east of India over the weekend, and should arrive on the sub-continent Friday, some 2 to 6 days early. When is the last time we heard of an early monsoon?


The Rio Grande Valley would appreciate a rain. All of 1N, the northern part of 2N, and the northern part of 1S got to 1 in the last week, and the entire state has recorded abundant rain this calendar year. The southern edge of 10S is the only concern, and this district is extremely important this year as it is the earliest crop. Our estimates show 190 k acres planted, with potential for a crop of 330kb. A good crop here relieves pressure on the July.

Varner View

Rumors of buy-backs and cancels are numerous. Mills that were fortunate enough to have fixed prices for old crop cotton are kicking some of it back to the merchants, if they can work a deal on the basis. Why not pocket a 10c move in futures, even if you have to give the merchant 2c to get out? This should free up some cotton for those mills still unfixed and in agony. Cotton is certainly in a small group of celebrities, as it and the SP are the only 2 long standing bulls around. Cottons % of net long specs is highest of any market on the board. Rawhide!


Volume yesterday was 107k, a new all-time record. We checked several other high volume days going back to the 2008 year, when floor trading ceased, and found that high volume could, but not always occur at a major price turn. 94k occurred at an intermediate low of 6800 on 11/11/2016. 73k was the volume on 10/10/2014, and there was no event. Around 6/14/2013, volume was high for 5 straight days, averaging 63k, and cotton made an intermediate high at 8919. On 6/06/2012 volume spiked to 68k, 2 days after a major low at 6610. Then on 10/10/2010, V hit 89k one day and 82k the next, making an all-time high of 15723. Therefore a high volume may not identify exactly a major high or low, but history indicates it is a likely canary in the coal mine. The July chart could make one of those textbook island tops, as the last two days are up in the air following a gap higher on Sun night. This pattern needs a gap down to complete, and lower close. Thus recent price action would have a gap on both sides of the bars.

Varner Brothers
325 Cotton Row Cleveland MS 38732


(662) 846-6636

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