Still Hot
What has been, still is. Demand is robust, hot, scorching, whatever one's description. Sales of 362 krb were in line with others since mid Nov, China taking high at 158, and Pak 2nd at 58. New crop sales were also good at 51 krb, as were shipments of 285. The new shipment target avg is 300 krb, and the new sales target avg is 100, without the roll. If the roll is as large as 2.5 Mrb, the target avg is 168 krb.
Based only on current shipments, the US can hit 16.0 Mrb, or 16.45 Mb (480#). Based solely on sales, the projection is a fuzzy 17.5 Mrb, which includes the roll.
In order to take in data from what some analysts call "the new price plateau," we began with the 06/07 year and plotted pinch points of carryout ratio vs price. The scatter shows points from about 62c to 94c, with an avg of 78c. This is a dime above the USDA's avg farm price, and if we applied a basis of -3c to our pinch point, the price for farmers is 75c, about 7c above the USDA. Applying a variance of 10%, the high/low for the rest of year, assuming the carryout does not change, is 8580c/7020c. We feel a little more comfortable with this price box, as it suggests a high is about 380 points above the Wed high, and a theoretical low is about 1100 points lower. Annual highs usually come in late winter/early spring.
The acreage battle is now in the sizzle, and Dec 21 cotton has averaged 73c since mid Dec. This is a gain of about 2c over year ago, when Mar Intentions were 13.7 M. This figure should be the starting point, not the 12.09 M listed as being actually planted. The large prevent figure from Texas distorts the planted figure for this year. The cotton/corn ratio last year averaged 0.178, and this year has averaged 0.165, down 7.3%. The cotton/soy ratio last year averaged 0.075, and this year the average is 0.061, down 18.7%. One can use the changes in ratios and the change in the Dec price year to year, to estimate acreages for states other than those in the West. But the wild card is all those dryland acres in W TX and whether or not they come back.
Technicals
Regards the $, it has been in a holding chop this week, after turning momentum + for daily and weekly charts. Seasonal history indicates a high around 1/20, then generally higher levels into mid to late Feb.
