Chinas National Bureau of Statistics said cotton acreage will fall by 0.7% this year. This goes against estimates from other government sources of an increase as much as 7%. Nylon yarn in China has given back 60% of the price rally from last summer to the Feb high. This weeks price is $1.18/#, lowest level since Dec. Caprolactum prices in Asia continue to fall, now at 81.7c/#, down 30% from Feb high in China, and down 20% in SE Asia and Japan.
An Indian meteorologist predicted an average monsoon for his country this year. In W TX, rains a few days ago have really prepped the worlds most important cotton area for a great start.
In the commodity celebrity arena, Citi has joined Goldman in predicting crude price to $62 in 4Q. Dec crude is at $54 now, so that would be a 15% rise. Regards the July/Dec spread, it is getting attention for its negative seasonal entry (today), and results a year ago. The 2016 spread peaked at +190 on 4/20 and fell to -150 on 6/21. Carryout was 3.8 Mb, and the ratio was 29.8%. This years carryout of 3.7 Mb and ratio of 21.3% represents a tighter situation than 2016, and these numbers are fluid. The invert at +400 current has already priced in a very tight end stocks and ratio, but the bear side is good only if sales cool off. This spread is not for widows and orphans, and should only be tried by Texans and a few cotton men on Ramcat Alley, Cotton Row and Front Street. We feel more comfortable picking spots to sell new crop.
Following comments and chart from Dave Toth, technical analyst. The Fibonacci fact that Mar-Apr’s relapse stalled within a tick of the (75.34) 38.2% retrace of a suspected 3rd-Wave rally from 12Oct16’s 68.00 low to 06-Mar’s 80.27 high would seem to reinforce this bull market (4th-Wave) correction count that warns of an eventual (5th-Wave) resumption of the major uptrend to at least one more round of highs above 80.27. Again, a failure below 75.35 is required to negate this count and resurrect a broader peak/reversal environment.3
325 Cotton Row Cleveland MS 38732
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