A Few Acres More
One line of thinking over the import ban of textiles from Xinjiang province is that this forces China to buy more and more cotton from the US. China has increased purchasing from the US due to their trade spat with Australia, and has now ramped up again over the Xinjiang squabble. None of this adds or subtracts cotton from the world's total supply, but it does draw down stocks in the US where price discovery is made.
Picking back up on the discussion about new crop, only the rice market has returns low enough to warrant giving up a significant share of its acres to other crops. But rice is planted on a tiny US acreage base, so what acres it does lose (primarily to soy), won't amount to a hill of beans. In the last decade the US has planted from 2.54 to 3.64 M acres, so if rice acreage dropped back to the low, soy would gain only about 1/2 M acres in 6 states.
Just a week ago, we had calculated that cotton would lose 5% of its acres to corn in states east of the Sabine River, and 18% to soy. That just got whittled down to 3.5% and 15%, taking into account cotton's recent gains and losses in corn and soy. Then there is that little issue of what figure to start with when one is calculating each state's plantings. If TX/KS/OK get rains sufficient to plant, then those states with few or no alternatives can easily increase acres, thanks to Dec at 78c. The 10 day forecast for the Llano Estacado shows nothing.
Currencies have been twisting the last few days, with no immediate trend. Chicago markets appear to have begun a correction, but what a correction looks like may be quite tricky. Corn and wheat balance sheets do not support their current prices, but the soy balance sheet is nuts. Old crop futures have reached a price level which inspires rationing, and new crop futures have that price that inspires acres. Repeating, we recommend farmers move to 20% hedged for new crop, with Dec near 77c.
Friday's low of 8025 is the first price to watch if Mar rolls over. There is an intra-day low at 7996, and two at 7865. The 21 day avg is 7881, rising at a sizzling pace of 35 ticks/day. By Fri the 21 day will be at 7950. We find the Dec a more intriguing chart, with what is now a triple high at 7800, and a long term weekly 233 Fib count from the major high in Aug 2016, also at 78c. The rally from Aug 2019 to Jan 2020 was 96 days, and the current rally as of