Other analysts are cutting world production, similar to but not exactly as we anticipate. Our cuts are: US down 350 kb; China down 750 kb; Turkey down 650 kb; Pak down 250 kb; Aust down 200 kb; for a total cut of 2.2 Mb. One respected analyst and trader came up with exactly the same overall decrease, but slight differences in each country. Another reliable source was terribly pessimistic on Aust, due to the worst drought in a decade.
Wiping out 2.2 Mb from world supply would appear to be friendly, but all it does is to get the world carryout ratio back to same as year ago. And, the carryout is being pushed little by little away from China, and into countries that generally eschew paying carrying charges for large ending stocks.
Chart below shows ROW carryout ratio. The highest ratio was 01/02 at 47.9%, futures high/low was 4820/2820. Ouch! In 04/05 the ratio was 44.8%, high/ow was 6050/4200. The 11/12 year was ignored, due to hording and implications thereof. This year’s ratio is 41.4%, and the high/low so far is 6600/5620.
Bullish arguments are being touted due to above production cutbacks, but also due to the elusive China trade deal. Some theorize that the China state reserve will comply with a trade deal by purchasing several million bales for the reserve, and letting them sit. That has certainly worked before, and we would be all in with this if we could count on it. This policy would not change world supply/demand by a bale, but it could certainly withhold inventory for an undetermined time.
Dec has eased below the 21 day avg. Next support is the 34 day at 6283, and this coincides with a positive trend line off lows of Aug and Sep. The trend line has been in effect for over 3 months, and is considered strong support. Below that are the 55 and 89 day avgs at 6155 and 6180. Seasonal history is negative into 11/23.
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