What Me Worry?

agricultural, Commentary, News, Technical Analysis

With the continued meltdown in grain markets, and the stock market joining in, we thought the cotton market held its own today. Trade broadsides are coming daily now, so many that they are hard to keep up with. And in spite of a calamitous $1.50/bu loss in soy, and a 70c/bu hit in corn, the farm sector remains resolutely behind the admin. We are in the heart of Southern farm country, and attitudes are that the trade thing will soon pass, prices will recover, and Trump will have delivered the nation to a stronger, better, more fair trade economy. In the words of Alfred E. Neuman, What? Me Worry?

Chances of rain in W TX on 6/29, 6/30, 7/07 and 7/08 according to CWG. Crop indexes are bound to bounce, but probably wont reflect all of the good weather in one report. Weather Underground, in direct contrast to CWG, shows little to no rain for TX next 10 days. But for the first time since last fall, there is enough moisture.

Varner View

At 85c, cotton remains the King of the Row Crops, and our guess is that world acreage will be a little higher than current forecasts. Consensus opinion calls for 14.0 M US planted acres, and we have no issue with that. Our own work showed that 14.0 M was a rather difficult number to get to, without raising TX. The TX record of 7.55 M was made in the 2011/12 year, and even though Dec has traded 85c to 95c during planting, this years price is a pale image of that 7 years ago. This weeks trading will likely be sideways, in front of the acreage report.

Technicals

The Dec chart continues to have the look of a 5 wave move down, with the likelihood that todays high of 8622 is the 4 wave. If that is correct, one more new low below 8294 is necessary to complete. Once the 5th is in place, Dec should then move into a larger correction. That correction could take prices back to 8660 to 8975.


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

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