Not much news this week, traders have to focus on mundane matters such as notices and certs, of which there are now 686 and 84 kb. Our guess is that certs will continue to rise, and most of them will slowly come out into the export channel. Sales report is due Friday. The US sold a total of 1 Mrb in the last 3 weeks, combined crop years.
Trump is stalling on signing the Hong Kong bill, but pressure is building for him to sign. This will irritate China, but they have no one to blame but themselves. Legislative elections yesterday were a huge rebuttal of China’s bully tactics.
Drought continues in Aust, and some see this crop slipping below 1.0 Mb. Aust produced only 620 kb in 07/08 as a result of a 3 year drought, so production below 1 Mb has precedent.
Open interest was purged by 53k, going from 250k to 197k as notice approached. Normal. Volume picked up on the rolls, and now is back to the holiday doldrums. 65c is a dead center break even price, and cotton will likely pivot around this for weeks, maybe months. Two positive seasonals are in play now, both beginning on 11/23, and ending on 1/02 and 2/02. We see little to do at the moment.
Recent demand has been good for 3 weeks, but at the same time competitive row crops have been sinking to 2 month lows. This may not matter now, but will come into play in a month. Cotton has eased back into 1st or 2nd place among 6 row crops in the 17 states. Outside the Chinese hoarding years, an 80 Mb world carryout and a 67% ratio are more aligned with price channels much lower than 65c. Once Dec goes to notice, cotton enters its “demand” phase after pricing in harvest. We will try to be patient to see if there is more to this rally.
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