Torrential rains in Xinjiang have replaced the W TX drought as the raison d etre of the moment for cotton. Popular weather analysts have largely ignored these rains, focusing instead on issues in northern China. What we are hearing is that some replanting is necessary, and as the local flooding occurred in early May, there is plenty of time to replant. This doesnt seem to matter to Chinas hordes of specs, who have been ravenous in their buying, mainly of back months. This has put a fire beneath our Dec, which has moved up 6.5c in 6 weeks, and 3c in 3 days.
Weather analysts are mostly in agreement that the Llano Estacado will continue getting rains over the next week. Rains are coming in dribs and drabs, not all at once.
In another odd weather event, the Indian monsoon is said to start on 5/29, is on time, and is expected to be average.
The forecast rains on old Comancheria make planting and emergence possible, avoiding an early capitulation and complete disaster. The drought is not broken, but most of W TX dryland can now get a start. We had begun the process of placing extreme drought conditions on 1N and 1S to estimate production, and that exercise has to be thrown out. The Roulette Wheel got a new spin, and for the moment the disaster has been eliminated by a fickle Mother Nature. As for China, had these rains occurred in mid June rather than mid May, it would be too late to plant. However, some forecasts call for more rain, which will hinder replanting. One side effect is that Xinjiang will be amply supplied with moisture. We find the reason for this spike to be very short term, and not sustainable. For the 4th try, cotton will fail at 8750.
Strong support lies at 8330, and strong resistance at 8750. There is a 4c space to bang around in, so volatility could remain high. The back months have been leading on this 3 day spike, which is usually not a sign of continued strength.
As always, please use protective buy and sell stops when trading futures and options.
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