Varner Bros. – Cotton Row Journal

agricultural, Charts, Commentary, News, Technical Analysis

Scattered

First observation for US new crop numbers – fair enough. The acres look a little low, but we are ok for now with yield, seeing as how TX controls so much production. New crop exports appear to be optimistic, but history shows if we grow a big crop, then we ship a lot – at cheap prices. And that probably means not with a “7” in front.

World numbers give a few points of contention, as our new crop production is +3.3 Mb over USDA. However, we noticed the major countries of China, Brazil, India and the US are all near our numbers, so that means we have to get in the weeds and find out which minor and intermediate producers don’t add up. The only old crop figure worth mentioning is that India’s crop sank to 25.5 Mb after confirming 3 months of hearsay.

Varner View

The last time the US carryout ratio was this high was Feb 2018.  Price that month was wildly swinging between 75c to 82c.  The last time end stocks were this high was April 2009, and that was the month that cotton made a major low at 40c.  So much for historical comparison.  World end stocks are at an 8 year low, and the ratio is same.  The problem with comparing this to the years since 2010 is that a massive amount of stocks were held off market.  This year is the first time since then that world end stocks are mostly in free hands, so the 60% ratio can be viewed in comparison with years prior to 2010.  From
1986 to 2009, only one year had a ratio +60%.  The US end stocks and ratio controls price, but the world ratio of 60% is historically very large, outside the China hoarding years. 

Technicals

Re July, 6750 is lower channel support, and if wave 5 = 1 the target is 6775. For the spot chart the same method targets 6582. For Dec, a trend line indicates some support at 6885, and there is major, multi-year support in the 6550 to 6615 area. July looks like it is now in a minor 3 down of 5, meaning a small bounce is coming, followed by the final leg down.



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