Sales and exports will be released Friday, due to Veterans Day. Of which, we salute Rogers Varner, Sr., Sgt, USMC Aviation, Pacific Theatre, WWII; Earl Overton Varner, Sgt, 115th Field Artillery, 30th Div, WWI; Capel Perry Varner, Major, 3rd South Carolina, Co. K, Army of Northern Virginia; John Belton Mickle, Major, US Army, War of 1812; and John Broadwater, Col, Continental Army.
There are 3 unknowns as we ease into Thanksgiving. How much, if any, of US production is to be lowered due to multiple storms and a late crop. And, just what cotton consumption will look like once the virus spikes are over, and the vaccine is available. And last, and certainly not least, what the winter acreage war will do to cotton acres.
These issues will not be resolved swiftly or clearly, and will make for some volatile price swings. Then there is Dec notice, and with certs now +90k, and the Dec/Mar spread at 75% of carry, this thing looks almost settled.
Our research dept has one CPA, on CFA, and one lonely engineer (PE). Together, we arrived at a "fair" value for cotton right at 60c. What this price lacks, is any influence from the soy market, and its explosive balance sheet. Soy is set to steal and keep acres from cotton once the decision period is upon us, and that means cotton will get indirect support from lower plantings. And, the cuts will come from states that can opt for soy, or corn, and have much higher yield avgs than does TX. Cotton's balance sheets beg for lower acres, and they will be shed. But this will be a limiting factor for a price at the lower end on the annual avg. Stay short for now.
The Mar is drifting toward a seasonal low, due around 11/21. Should Dec take out the 6806 low of 11/02, this will prompt spec long liquidation. This may happen in a day or so, and coincide with option expiration on Fri. We expect spot to test the 6600 area by notice day.