Report numbers from the US were pretty much neutral. Production at 19.0 Mb was right at our figure. Old crop exports could be raised a little. New crop exports? 13.5 Mb looks low in the current environment. World consumption was kicked up yet again, by Mb. It wasnt long ago when world use was 111 Mb, so cotton in the last 2.5 years has regained consumption lost when prices soared from 2010 to 2014.
World end stocks rose 1 Mb, mostly due to similar rise in Indian production. We have long predicted a rather flat world end stocks situation, with old crop and new crop end stocks hugging 90 Mb. So far this looks about right. The big change for new crop is that about 6 Mb will fall away from Chinese stocks, and end up in major exporting countries. This is negative.
There was not much in report numbers to move the market either way. Our hope is that a rally on weather could move Dec close to 7000, and give farmers and specs another shot at the bear. Grain markets are a supportive force for cotton, and none of the Chicago markets reacted strongly to todays numbers. Its all about weather and wheat over there.
The roll from July to Oct on spot chart left a pretty big gap at 7140 to 7360. This gap may be tested later, but a test is unlikely in the short term. The length above the gap is about 15c, so a move below the gap of the same would target 57c. That seems rather harsh, but the 15 month positive trend line was broken in mid June, and this market is nothing but bear now.
325 Cotton Row Cleveland MS 38732
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