The big question for the report tomorrow will be exports. A 62% ratio of total supply is 12.6 Mb exports, while 58% is 11.8 Mb. The US has sold 74.4% of the target, in line with other years. Last year this stood at 54% and two years ago it was 77.5%. With price now 7% above 2 weeks ago, and 10% above the 4 month average, sales in the back half of the market year will be a tougher slog than in the first half. This Thursdays sales will be sub 100 kb, maybe not even 50 kb.
Winter farm shows are all over the place, and that means farmers are making orders for seed, chemicals and fertilizers. The top two choices for the good ol boys are cotton and soy, by far. Dec 17 is picking up more and more acres every day it trades +7000.
Cert stocks have jumped up to 100 kb, with more in waiting. When price moved up sharply, a lot more cotton got kicked out of the loan and is now likely hedged in Mar. If we are right and sales do cool off, then some of this cotton will make its way to the Board. We think cert stocks are headed north, and that means more carry. Full carry Mar to May is about -200, and this spread is today around -35. Mar to July is -400 full carry and is only -65 today. Traders may want to ease into some bear spreads for springtime.
Chart shows the long term 22 month cycle, which has been a very reliable timing indicator. The chart labels all cycles since 1992, the most recent being Aug 2016. The next cycle is thus June 2018, and it coincides with another long term cycle of 27.5 months, due in May 2018. Another interesting feature on this chart is the trend line across tops of Sep 2011, Mar 2014, Aug 2016, and Jan 2017. Notice that this months high rose to the exact level of the trend line, making this 5 year resistance line a key level.
325 Cotton Row Cleveland MS 38732
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