Sales vs Shipments
Sales were on the shy side at 136 krb. Viet was high at 64 krb, Pak 2nd at 33, and China did a backslide for -24. New crop sales were zip. Combined sales were 2nd lowest since 1 Aug. Shipments were good at 296 krb, about +20 vs the target avg.
About that gap between sales and shipments. Normally, shipments lag the sales pace from Aug into New Year, due to pipeline and logistics issues with harvest and availability. Not this year. Shipments are standing tall, a full 1.1 Mrb above year ago, and best ever for the 2nd week of Nov. Table below shows this year and the previous 4 in terms of cumulative sales and shipments for the 2nd week of Nov, and how they compare with the actual shipment of that year. The % of cumulative sales vs the final shipment is remarkably similar for this year and the last 2. Sales for this year and the last 2 are running right at 2/3 actual.
The cumulative shipment vs actual (or target for this year) is a whole other deal. Shipments are at 28% of the target this year, compared to 18.9% and 16.2% for 19/20 and 18/19. A normal year an analyst would begin measuring and observing sales more closely, then switch to shipments in late winter to get reasonable projections. This year is not normal.
If a cotton trader was to project final shipments based on current cumulative exports, he would have a figure well above 15 Mrb, perhaps as high as 17 Mrb, as compared to the target of 14.2. A projection based on cumulative sales would get something around 15.75 Mrb. Whats clear is that the USDA is using neither of these benchmarks to measure final shipments. It is standing on that old ratio of total supply, of 60%. The math is 0.6 x 24.35 = 14.6 Mb (480#), or 14.2 Mrb. Easy work. The economists and statisticians at the USDA have not budged from this 60% "rule" the entire crop year, if one wants to crank out the ratio himself. When supply changes, adjust exports accordingly. Its not that the USDA sees a steep drop in demand, it is that they stick with the 60% measure through harvest, and into winter. The big question now is – can the small drop-off in sales be reflective of a cooling in demand, or will the USDA begin ratcheting up the export projection after New Year? At 70c, the market believes the shipment target is too low.
Regards the most active continuous chart, the roll to Mar was made on 11/11, and since then spot Mar has traded in a narrow 7018/7200 range in 7 days. This chart shows a nice channel since early Apr, high to low of about 700 points. Current high/low is 6900/7600, and price is slightly below mid range. First indication that the 8 month bull trend is in danger, would be a violation of the 7018 recent low. A seasonal low is due Mon, but this has been a push this year.