Going through the sales leaves the impression of a very weird week. Old crop sales were only 38 krb, with China canceling 61 krb upland and buying 18 krb pima. China threw in heavy for new crop, buying 195 krb of 246 krb total. This was the lowest old crop figure since right after Thanksgiving, but new crop was unseasonably large and in line with the last 8 weeks. Shipments were ok, but these figures have been easing down toward the target average of 353 krb. We will call this report neutral, but strange.
With Chinese prices high enough to arb between their market and our cotton, demand has remained brisk enough to tack on another dime to US futures in only 2 weeks. Some analysts are slicing their new crop by 1 to 2 Mb, implicating that much more cotton has to be imported. Combining Chinas early planting problems with the TX drought, and the Indian bollworm issue, gives the market a trifecta of things to worry over. Its not just one thing, its 3.
Whatever else one thinks of this market, a farmer has to throw the kitchen sink at current prices. We recommended the purchase of Dec 70, 72 and 75 Puts during late winter and spring, and those Puts today offer little protection. Action must be taken now by either fixing the price, or rolling up those Puts. Selling ones entire production here and now is much more preferable than gambling on a run over $1. That may happen, but there is too much to risk.
As always, please use protective buy and sell stops when trading futures and options.
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