Cotton has withstood the gravity from the CRB well, holding onto the 70c pivot for 3 weeks, while its kindred markets have dropped 5% to 10% in just a month. Cotton usually follows the CRB, but not this time.
Since Dec 19 expired, the Dec 20 has averaged 7140. This compares to a year ago at roughly 7500. Earlier estimates of a 10% to 15% (some as high as 25%) decreases in plantings are too severe. More like 5% to 10%.
Seems like all the headlines involving cotton are coming out of China. The trade deal was supposed to be bullish while the Coronavirus is on the other side. Our sense of the virus is that it will run its course, generate a few headlines, then fizzle away as Spring approaches. Comparisons to historically similar events decades ago appear to be mostly for sensational news coverage, than real analysis. We have tried short side of cotton, and admit to a push as of today. It may be a good idea to punt the push, and see if another opportunity arrives soon. There was a drive in the Mar/May spread to -30, but this may not have been quite enough to cert any cotton. We are also picking up talk of very good sales for Thur. Our guess is 450 krb, but that is a rather wild guess.
The 2nd of 2 positive seasonals that began on FND for the Dec contract ends on 2/02. A quick spike back up near the highs by next Mon may present another chance to sell Mar, or May. Mar, May, Jly and Dec all have established price channels since the Aug lows, and have adhered strictly to staying between the lines. High/lows in the respective channels for Mar and May are 7315/6725, and 7375/6875.
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