6’s and 7’s
Cotton had a “6” tag in front of it much of the last few years. The last time soy had a “7” tag was in Dec 2008, and some young traders today have never seen this. Can the ag markets be re-entering a period like that prior to the 2007 take-off?
Sales were outstanding at 238 krb, Turk was high at 79 and Viet 2nd at 57. China bought 37 krb combined, and India took 27. New crop sales were very good at 62 krb. Shipments made this report all-round good at 404 krb. Just when it looked like demand was faltering, cotton comes forth with a bang-up week. The sales target is met, meaning the rest of the year will be spent on the roll. Shipments need to avg 440krb/wk to make the target.
Getting a lot of calls and advice to cover shorts. After a dime drop, why not? Oversold, Trump/Xi, rain, sales, all scream cover. Notice we said “cover,” not buy. A short or a hedger should be sensitive to protecting profits, but we would not buy this market by a long shot. Mid 60s seems the long term ballpark breakeven cost of production, and if time was right that could be a spot to buy something. A premium for weather and a trade deal must be added to whatever one’s fall low is, and that premium is one tough number to calculate. Often deciding how to manage a big winner is much more difficult than deciding what to do with a loser. Punt the loser. As for booking a profit, or taking off a hedge, we are as confused as and nervous as anyone.
A couple of targets mentioned in these pages are now in play much sooner than we thought. 6915 and 6910 are a trend line value and an extension. July got within 50 ticks of those today. Timing remains our larger curiosity, as Friday falls on a 21 count from the recent high, and Monday is very important, falling on 2 long term counts from major reversals.
As always, please use protective buy and sell stops when trading futures and options.
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