|World Acres On The Rise|
|Since China reserve sales began, offerings sold 100%, 99%, 97%, 94.5%, and today 93.8% of total offered. Price on first day averaged 102c, then 100c, then 99c, then 97c, then 94c. China futures market has dropped about 6c in that time.
Todays employment data showed 235k jobs added, which was ever so slightly friendly for the dollar. The buck immediately dropped 0.6%, which leads us to suspect the dollar has done about all it can do when it hit 104 in early Jan. Traders have built in 90% on 3 rate hikes this year, and 70% for 4.
Cottons ratios vs corn and soy have risen back to 6 and 5 year highs, as the northern hemisphere gears up for planting. Peaks in world plantings came in 2011/12, 2004/05, and 1995/96, with acreage total near 88 M. Prices in the prior year to planting were all higher than today, so we dont expect anything close to 88 M, but we also think that the world will plant at a higher increase than the consensus +7%. A 10% rise would place world acres near 82 M.
China sold 97% of cotton offered through reserve sales, average price of 94.5c. Price on the first sales day was $1.02.
The futures market averaged about 64c last market year, and this year so far it is around 73c. This gain of nearly 10% will be a powerful magnet to pull in more acres worldwide. The lowest acreage since 1960 was 72.5 M, in the Inventory Protection year of 86/87. Three years that did not have direct government involvement showed acreage lows at 73.8, 74.5 and 74.5 M (last year). This should be seen as a benchmark low, with highs scattered from 83 to 88 M. There are a dozen years in which the world planted roughly 82 M acres, and we think the price gain vs year ago will lead to somewhere near that number this year.
Todays close gave the first sell entry for the so-called 5 Point Top pattern, via the close below 7800 on May. A 2nd entry may be triggered when a daily high is below 7800. A seasonal high is due avg date 3/10, with Mar highs occurring as late as 3/26 (2014). Today is one year exactly from the major spot low at 5566.
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