Indian Shell Game
China bit off a size order for US corn, after Ukraine passed. More and more countries are deciding to hoard commodities for their own population, in an effort to keep "the people" pacified and not have to face high prices and shortages. Chicago markets jumped yesterday and today on the new purchase, lifting them off of a pretty good correction.
Occasionally, rumors and theories pop up about stocks being carried in India. This country has seen some rather large write-offs of cotton in the past, much like those in the US. Pre-Corona there were rumors and predictions of another large write-off but it never occurred. And this is understandable as a powerful bull market has all but ignored record stocks in India. Why doesn't this cotton pop out in export channels to partially satiate booming demand? Just 2 years ago India had less than 10 Mb for end stocks, and that amount has swelled to nearly 20 Mb. Much of this doubling of stocks was due to a huge hit in domestic demand, as India went from 24.0 Mb in 18/19, then to 20.0 Mb in 19/20, and has now rebounded to 24.0 Mb. Why the 4.0 Mb drop in demand last year? Theories exist and many traders surmise that the demand last year was in fact normal and more in line with 24.0 Mb, thereby the end stocks are actually 4.0 Mb light. Depending on who one talks to, Indian stocks are anywhere from 2.0 Mb to 6.0 Mb phantom.
79c Dec is doing pretty good battle with new crop soy at $11.50 and corn at $4.50. All 3 crops pay off handsomely, with soy ahead of the trio. Sorghum and wheat are money-makers, but neither competes much for cotton acres. Then there is rice, offering puny profits for new crop, but this is a niche market in cotton states. In another 2 weeks most of the acreage decisions will have been made, and seed, chemicals and fertilizer will be ordered for those crops. Last year's March intentions was 13.7 M, and a 5% reduction is right at 13.0 M. Now all we need to know is what to do about the 2 M acres of dryland in W TX.
8150 is minor support, with 8060 the next level. Major support is at 7865, low of 1/11, and an intra-day low on 1/04. COT reports indicate some rather large new longs in Mar, clustered from 7700 to 8100. Regards the $, it has established a 2 month trading range of about 200 points, and may continue a flat track, as it did from late July to mid Nov.