Varner Bros. – The Cotton Row Journal

agricultural, Charts, Commentary, News

A Push

No fireworks, no inside straights, no limits, and no fun for cotton traders. The dullest of all reports was the US cotton SD with no changes for end stocks across 3 years. On to the world. Slight changes in a few countries gave end stocks a boost by 1.5 Mb, hitting 77.25 Mb. We have a figure ballpark 80 Mb. More words from others can be said and written about this report, we choose to move on.

One major weather service ran a special on India, using the word “sluggish” to describe this event. We have used staggering, sputtering, tardy, erratic and so on, and it seems as if every year the monsoon is a slow riser. A cyclone off the west coast is developing, and a long shot has it benefiting Gujarat, the top producer. Cotton areas in the nw of India got something akin to our mid west in May, a deluge. From Rajasthan up to the Kashmir rainfall in May was +300% to +400% of normal.

Varner View

Chart below shows cotton is at “fair value,” if there is such an animal in this crazy business. A 6.4 Mb carryout and a 32% ratio point to 65c as the right price, with a little razzle dazzle around that figure. A 5% swing around 65c means 6175 to 6825, so best to wait and see which one the market tests first. The only issue with a 65c fair value is that things will change. The weather, the demand, the yields, who knows what will be in effect come fall. Our bias is that the world crop will creep upward, and that more of the world’s carryout will be sitting in countries that have to pay carry, unlike China. We want a nice summer rally to sell into.

Technicals

Not much to discuss.



As always, please use protective buy and sell stops when trading futures and options.

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