Scanning the survey numbers for the Friday report, there are 2 that appear to be based on using strict historical averages. Those estimates put forth US production at 19.8 and 20.5 Mb, which we found is possible running with the March acreage and applying 8 or 10 year figures for yield and abandonment. This is ok, given that the USDA is going to use similar strategy. Where we differ is that no matter the month, we run our numbers based on conditions as they are. So even though it is a fair method to use history and averages, our work leans for much above that given conditions in the US currently. They could not be better.
We cut old crop exports by 1/2 Mb to arrive at a carryout of 4.83. Our new crop production is 22.5 Mb, and the export is calculated at 60% of supply, about 16.5 Mb. Carryout thus swells to +7 Mb. As for world numbers, we may be low on both production, at 128.8 Mb, and consumption, at a flat 125.0 Mb. In any scenario, world stocks grow, especially outside China.
If it were not for all the noise about the China trade fight, we could focus on our market and make some decisions. As things stand now one doesn’t know if a deal gets done, or not, this weekend, which causes euphoria or angst to explode into the opening on Sun night. Things like weather and sales report and USDA monthly get sidelined for the trade headlights. Both Xi and Trump want this thing, on their terms, and both are obstinate and stubborn. Xi may hold one “trump” card in that his country can suffer longer than the political types in the US, but Trump knows China has most to lose. The balance sheet for cotton is getting bigger, and eventually that is all that matters.
July and Dec are both holding, for now, the lows made in Feb. No doubt there will be some tech letters that claim a double bottom is here and now is the time to buy. Cotton is getting oversold, but thats about it. We did notice 3 Fib counts are due soon, one from an intermediate high, the others from major reversals. Friday falls on a 21 count from the high of April. Monday falls on an 89 count from the major low of Jan, and a 233 count from the multi-year high of June. These 2 counts have our eyes on the long term nature and from such a significant price. We will be more than curious to see if cotton can perhaps put in a low of some sorts on that day. Chart below is from our favorite tech type, Toth shows an Elliott pattern we agree with. Now if he would just tell us where, and when that 5th will be put in place.
As always, please use protective buy and sell stops when trading futures and options.
Disclaimer: Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. Any decision to purchase or sell as a result of the opinions expressed in the forum will be the full responsibility of the person(s) authorizing such transaction(s). BE ADVISED TO ALWAYS USE PROTECTIVE STOP LOSSES AND ALLOW FOR SLIPPAGE TO MANAGE YOUR TRADE(S) AS AN INVESTOR COULD LOSE ALL OR MORE THAN THEIR INITIAL INVESTMENT. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.