Varner Bros – The Cotton Row Journal

agricultural, Commentary, News

Small Ball

Markets go nowhere more than they trend. Chops and sideways action, false breakouts and head-fakes are more common than a 3 month move of 12c. With cotton trading around 65c, this price represents a pivot level for cost of production, and without big changes in weather or the $, we may be here for a while.

As cotton tip-toes into the time for some new crop decisions, new crop is marginally lower this year vs its major competitors than year ago. Dec 19 was about 6c-8c higher, so we expect some small reductions in acreage. Yields and subsidies come into play, as farmers east of Dallas all the way to Savannah had a good experience, while W TX was just one more in a string of disasters.

The world has too much cotton, but a few less acres and a falling $ may offset a world surplus to keep cotton in a small ball batting cage.

Varner View

Scanning row crop cousins and close kin, we find cotton is well into bi-polar action as is soy, corn and wheat. Copper is no trend setter, as it has been stuck in a horizontal price channel since May, a box of $2.50 to $2.75. Crude has pivoted around $55 since May, closely aligning with copper. Only the stock market has a trend, and perhaps one can make a case for a couple of the softs awakening from their slumber. In this kind of environment, playing small ball is better than betting for the home run. Breakouts on either side almost always end up as head-fakes, as cotton is known for.


The 6600 barrier has kept a lid over the Dec, the Mar, and the spot chart for 8 weeks. Momentum has turned down at a time seasonal history is positive. Traders looking for direction should keep one eye on the $ and another on the Real. The $ has reversed downward – again – and the Real is holding major support near 23.50. A lower trend for the $ would help the bull side bust through 6600. We watch from the sidelines.

Varner Brothers
325 Cotton Row Cleveland MS 38732


(662) 846-6636

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

Disclaimer: Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. Any decision to purchase or sell as a result of the opinions expressed in the forum will be the full responsibility of the person(s) authorizing such transaction(s). BE ADVISED TO ALWAYS USE PROTECTIVE STOP LOSSES AND ALLOW FOR SLIPPAGE TO MANAGE YOUR TRADE(S) AS AN INVESTOR COULD LOSE ALL OR MORE THAN THEIR INITIAL INVESTMENT. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.

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