Expectations of a cut in the US crop of 3/4 Mb were denied by the bale counters at the USDA. There was a tinkering with some of the yields, none changing much other than OK. That state got kicked for a 180#/a drop, which is now exactly what the TX yield is across the Red River. Left alone were planted and harvested numbers, and these can be expected to change in the Nov report. An unchanged end stocks number left a lot of bullish traders crying "wait till next month!"
The world SD was a positive, but end stocks remain absurdly high, and are still +100 Mb. End stocks are 2nd highest all-time, and more cotton will be in ROW than in recent years. That is the issue. The ratio has dropped 2 points to 88%, but remains historically extreme compared to the years prior to China hoarding. China's share of ending stocks is "only" 35%, leaving everybody else to tote 65 Mb into next year. That is a load.
Even though cotton's balance sheets do not support 70c, the outside markets do. Corn lost 430 Mbu in stocks, soy lost 70 Mbu, and wheat lost 40 Mbu. Metals have turned around, the $ is lower, and the SP is churning upward. The world wants, and sees inflation.
The US end stocks have been cut down by 800 kb since June, and world end stocks have come down 3.8 Mb. But both numbers remain historically high, and argue against prices above 70c. The US ratio of 42% is the highest in 13 years, and has changed little during a rally of $100/b. Given the strength in the market, and an impressive +6 month rally of 20c, there have to be other reasons. Strong grain prices have helped, as has a 12% decline in the $, and a widespread expectation of inflation. Without those 3 key catalysts, cotton would be mired in a 60c/65c range.
In most years, cotton makes a low in fall and a high in spring. Is this an upside down year? Chart below shows a theoretical high for this year at 72c, but with a low R sq.
The roll of Oct to Dec has left a nice star on the spot chart, also showing a breakout at key resistance at 66c. The positive seasonal from 10/02 to 10/26 has been working nicely, and the end time is near the beginning of liquidation for Dec. Being just booted from shorts when Dec cleared 66c, best to sit out and watch a bit. May, July and May 22 traded at or near 70c today. It will be interesting to see if and when cotton can close above this key level.