After spending more time this week than we wanted, Texas production is set at 8.8 Mb. Each district was analyzed by dry and irrigated status, and yield and abandonment were then selected based on conditions and history. Its always a challenge, but we try to be reasonable and objective. Overall abandonment was seen rising from 8% in July, to 12.7% in Aug. Yield for the state is 733 #/a, just a few pounds above last year. We have heard other estimates from credible sources in the 7.8 to 8.4 Mb area.
Chart below shows the 1S district yield, which is the most important cotton area in the world. Yield for dry and irrigated cotton is pegged slightly above average, as conditions this year warrant such.
For the rest of the country, we will have an estimate out on Monday. Our July estimate was 19.0 Mb, and early calculations indicate a figure from to 1 Mb above that.
Specs and funds continue to buy on hopes of the overused word sputtering to describe the Indian monsoon. If indeed the monsoon sputters, this will be the key adjective behind a weather rally. Weather in the States so far is not ideal, but it almost is. One can find a couple of problem areas, but overall the crop is in good shape. We are more contorted and confused over new crop exports than the production. For farmers, we like buying the Nov 70 Puts for about 220 points. This cost $1100, and allows a floor at 6780 well into harvest. Remember, the loan is 49.50 this year. Futures equivalent is about 57c.
A seasonal low for the $ was due from 7/28 to 8/02, and it has occurred on time on 8/02. Seasonal is positive into about 9/08. The $ since Jan 2015 has established a floor, bottoming 5x between 9200/9300. Make that 6x. The 38.2% and 50% retraces are 9677 and 9812. The decline of 11% took 7 months, so a multi-week correction is expected.
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