Barry Visits the Delta
There was nothing exciting in the cotton SD report, but good folks in the Delta are expecting a wet weekend, especially in the south. Current path shows a northerly push, slightly west of New Orleans, reaching the Memphis area by Monday. Rice is the only crop that may be bothered by high winds and heavy rains, but other row crops will benefit. Welcome Barry, we just wish it was during the week so as not to mess up weekend plans.
As for the US numbers – as expected. On to the world, where there were quite a few significant changes. Higher current crop production, and lower use in Bangladesh threw 3 Mb more to the world carryout. No idea why Bang was cut so much, and the Indian production of 29.0 Mb, +1/2 Mb, defies the stuttering, staggering, toothless monsoon over western and northern cotton areas.
The market swung wildly by 80 ticks, high to low, right after report release, but is only slightly lower after what we think was a neutral – confusing – slightly negative report. As for sales and exports, the seasonal dropoff in demand has certainly arrived, as high dog was Viet at 36 krb in a total of only 54. New crop sales were small at 42 krb, scattered, and shipments were steady as she goes at 344 krb. Combined crop year sales at 96 krb were basically tied for lowest since Halloween.
On the surface, the report had a tinge of bear. However, the USDA chose not only to ignore Indian weather, but move ahead with higher production based on what? Chicago numbers looked neutral to negative to us, but were up fairly strong as most traders have their own ideas of lower acres and lower yields. A low 60c price is fair enough for a US ratio of 33%, and our “fair” price for this is around 65c.
The double touch at 6025 on the spot contract remains out of reach for the Dec for now, as the spot chart is a puzzle. The Dec chart is nothing but negative, but we do favor the idea that the current move down is the final 5. The low can be anywhere from here to the 60.25 area. There is a seasonal low due next Wed. No reversal in sight.
As always, please use protective buy and sell stops when trading futures and options.
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