Corn = Cotton 2010
Corn may be entering the type year that cotton had in the market year 2010/11. After China announced and followed through on an historical inventory build, it became possible to zero out the US end stocks. Corn has reached this line in theory, with many analysts opining failed and prevent acres that wipe out corn’s end stocks to nothing. Cotton’s function in its zero year was not only to discourage use, but to force returns. If failed and prevent corn acres are really 9 to 13 M, then corn will have its own mirror image of cotton, circa spring 2011.
We turned in a 23.0 Mb US production, a little above our recent estimate of 22.5 Mb, but below the almost perfect situation of today which calculated 24.5 Mb. Then there are shipments, which are beginning to have that look of love. Today’s figure of 443 krb was best this year, and best since 1st week of June 2018. The target avg of 427 krb suddenly looks realistic. Sales of 290 krb were very good, with Viet high at 121 and India 2nd at 78. New crop sales were good at 136 krb. Combined sales were 427 krb, very good.
Varner View
New crop balance sheet is beginning to swell in both directions, with a huge crop and a huge export figure. With the jump in shipments, a slightly larger old crop figure to about 14.825 Mb is our latest fine-tuning. Then there is the old crop roll and new crop sales total, pushing up the value for the first week of Aug to something near last year. That was 8.47 Mrb, a record. The big issue with assuming that 2019/20 will be a banner shipment year is that there is poor correlation between assuming that a year will end as it begins. Things change often. We are negative, but good demand and the corn fireworks keeps us from doing much. Besides, our exit on short July at 6525 was good enough to coast for a while.
Technicals
A rather dull week as we head into the 3rd of June, otherwise known as Ode to Billie Joe day. Cotton has satisfied initial retrace levels, but there are others all the way to 7525 July and 7425 Dec. Seasonal is up to 6/13, as is momentum.
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