Varner Bros. – The Cotton Row Journal

agricultural, Commentary, News

The Pause

Trump threw a boomerang, as he is oft to do, into the China/US trade battle. He and Xi agreed to hit the pause button on disputes, and work out details later. In his words, “China will be buying large quantities of US ag products, they are going to buy big.” This put a bid into hogs, cotton and the stock market, as it was “risk on” for these 3 markets, however different they are.

Getting back to more local matters, it was interesting to see just how close the March and June acreage reports were to each other. The only standout state was TX, having a few prevent and failed acres knock down plantings by 150k. Not a big deal.

The one clear statistic that came out Friday was not in acres, but in the COT report. Spec net shorts reached within 3k contracts of record. As this report was tabulated on 6/25, the spec net short may well have hit a record as of month end. No wonder cotton spiked upward today.

Our production is 23.3 Mb, table at bottom.

Varner View

We are unsure whether today’s gap up means a real correction, or just a probe into the upper reaches of an entrenched 4c trading range. The Trump/Xi thing looks like a punt and headline, rather than a real finish on a complicated trade deal. Our guess is that a weather issue will have to be the muscle behind a real summer rally. A headline on Indian weather said this was the driest June in 5 years, and that major production areas in the nw are still looking for that monsoon in force. Stats on Indian production are a little confusing, as the USDA pegs it at 28.5 Mb, + 2.5 Mb, while the attache’ says its 29.3 Mb. Another source says planting progress is down 10%. The IMD showed southern Gujarat and Madhya Pradesh getting rain now, with Rajasthan and the north still waiting.

Technicals

Early morning excitement turned into the blues and the blahs, as cotton is cementing its hold on a range trade. A sell seasonal starts today, ends on 7/17, successful 13 of 15 years. A gap formed on open, it will be interesting to see if it can remain open. Resistance and retracements for Dec are a trend line at 6795, a small gap at 6925, and the 7200/7225 area, containing 3 lows and one top. Spot chart has a trend line and an old low at 6953.



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

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