Varner Bros. – The 3% Very Poor

agricultural, Commentary, News

The 3% Very Poor

Here is where it all matters for Texas: only 3% of a huge crop is considered “very poor.” The “good” out measures the “fair” by 30% to 19%, and there was another small rain around Lubbock Mon morn. A couple weeks ago some traders tried to label the W TX crop as a disaster, and it just ain’t so. We re-ran the spreadsheet on TX, got a crop of 8.25 Mb. Plantings at 7.15 M, abandonment at 21.5%, and yield at a flat 700 #/a.

Crop conditions showed a fall from excellent of 3%, with vp and poor up a notch. For most of the South, rains after mid Sep are not wanted, so don’t read too much into weather service analysis that suggests “late planted crops are suffering.” Once the bolls are open, no rain, please.

Our favorite “down on the farm” writer OA Cleveland opines selling cotton this year will be the old-fashioned way – using the Loan. Trading in equities last occurred in the 08/09 crop year, coinciding with a world recession and prices below 40c. Those were the days.

Varner View

Just because some, or all of this year will see prices at or below loan, doesn’t mean the planter is facing poverty or destruction. Far from it. Start with the loan near 52c, add an equity at 8c, add the seed subsidy around 6c (lint equivalent), and the Trump subsidy, it all adds up to almost 80c. Looking around at row crop alternatives, cotton does just fine, thank you, especially when considering potential record yields. The way clear for a rally rests with the possibility of a breakthrough in the Oct trade talks, and/or a definite turn in the $. A breech of 9800 would confirm.


Dec has spent 5 weeks in a tight, 3c range, but sideways, endless trading is common. From late Dec to late Mar, Dec traded 7225/7525, before breaking to the upside and making a spring high. The 34 day avg provides nearby resistance at 5995, and a clear breakout would occur on a close above 6025. Historically there have been several tops and spikes in Sep, usually born by hurricanes or squeezes on Oct. These have tended to peak around Oct notice, which coincides with the Autumnal Equinox. Momentum is positive, lets see if the market can rise for another 2 weeks.

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.

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