High Praise
It's been a long time since the cotton industry dared take on the synthetic, fake fiber competition. Witness the shiny, ill-fitting polyester t-shirts worn by tennis players at the French Open. But this past weekend, the Wall Street Journal ran a story on high-end t-shirts, such as those made with pima and Sea Island. Check it out, 3 Oct issue, page D3.
The arrival of Delta on Sat has once again excited specs, and they see the storm as cutting a few more bales off the Southern belt. We have not seen crops in the SE, but got a pretty good 250 mile tour of the Delta last weekend. Now that the crop progress report is out, we find once again that there is a long time delay between how the crop is considered "harvested," and what we saw with our own eyes. The crop progress shows MS, Ark and Tenn as only 17%, 13% and 7% harvested. What we saw, sitting in hundreds of modules, was something more like 1/3. This disparity brings to mind that old Groucho Marx quote, seen at left. By the time Delta arrives, we are confident of harvest at or over 50% for MS and Ark, and 33% for Tenn. A year ago a call to the NASS office, inquiring just what "harvest" meant, prompted a definition that was fuzzy, and more likely tended to be a bale that was ginned and wrapped, as opposed to picked and sitting in a module.
Cotton is tagging along with grain markets, and helped a little by a 7 day decline in the $ of 1.5%. There is also consensus opinion that the Friday report will cut the US crop by 1/2 to 3/4 Mb. The arrival of a 2 star hurricane adds to the bullish expectations. After an increase of nearly $100/b to price since the early Apr low, we think most of the supply decrease has been priced in. But with such bullish expectations, and the arrival of a hurricane the same day as a report, best to protect shorts with Call options or stops.
Technicals
One measure of sentiment shows a 91% bullish reading, highest in 2 years. Spec longs vs shorts are nearly 10:1. Weekly momentum is slowly turning from a very high level, but is not yet negative. Daily momentum has turned up again, the 5th turn since early Sep. A short term seasonal is positive into 10/26, while a longer term seasonal is negative into mid Nov. Mixed signals. The breakdown support levels are 6465, then 6340. The breakout level is a close above 6700. Beware of head-fakes, and false breakouts.
