To get some clarity on Indian production, and how the monsoon is treating the important areas, here are a few stats based on year ago. Gujarat and Maharashtra produce 46% of total, and if Madhya Pradesh is added to get the Northern Zone total, it would be close to 50%. The west and nw areas of India have been missed and teased by the monsoon, and production in all of these is: Gujarat 25%, Rajasthan 8%, Haryana 7%, Punjab 2.6%, for total affected production of roughly 43%. Using the USDA’s estimate for production of 29.0 Mb, some 12.5 Mb are thus under stress. The forecast has gotten a little better, but more will be known next week.
There are hit and miss chances of rain in W TX on 7/28, 7/29, 8/03, 8/04, and maybe 8/06. If all of these turn out to be whiffs and misses, the cowboys will yell “calf-rope.” The Delta and SE are loaded with chances of rain over the next 2 weeks.
Maybe the strongest negative force for cotton got stronger today, with the $ rising 1% on a GDP of 2.1%. We didn’t see anything particularly dollar-bullish on this number, but specs pushed the Mighty Buck near the 3 year high of 9825. The Trump admin has been jawboning for a lower $, and the current strength may prompt a tantrum from you-know-who. We made an error yesterday saying the market year sales and export report had another 8 days to go. Nope. It had 13. Our guess for shipments is 13.831 Mrb, or 14.25 Mb (480#). End stocks will rise by 1/4 Mb to 5.25 Mb.
We often use the Dec continuous chart, as this contract every year holds the most open interest and usually volume. Looking at the monthly plot, there have been 6 major highs in the mid 90s since 1960, the most recent 9482 in June 2018. The only contract to go above mid 90s was the all-time high of 157.23 in Nov 2010. There is a very well-fitted trend line coming off major lows of 3670 and 5419 in 2008 and 2016, and last week’s low of 6166 pricked this almost exactly. Also noticeable is support in the 6450-6550 area, which has been there for 3 years. There are a couple of Fib counts that hit this month (see chart), and then there is that ever-elusive head/shoulders pattern, so popular with traders. If this does work (we have doubts), the right shoulder should be forming now, more or less in line with the left shoulder from 6500/7700. That shoulder took 8 months, so a similar time for the right shoulder culminates late summer 2020. If all of this support gives way, the next major support target is 50c. Whoa!
As always, please use protective buy and sell stops when trading futures and options.
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