After getting perhaps half a dozen emails and texts on the RGV crop, it is obvious we have erred. Not having spoken to a farmer on the ground there in 3 weeks, we relied on groundwater profiles to assuage the crop. Even though moisture levels are in drought territory, the crop is doing quite well, thank you. According to a couple farmers there and a couple of traders, early yield estimates are very good, partly due to more irrigated acreage % than in recent years. This is a very important crop, as it comes off early enough to be available at the most critical supply time of the year. Before the 4th July weekend, we were very pessimistic on the RGV crop (mainly 10S), but things have changed for the better.
For the report tomorrow, a better RGV would push US production back to a razor width of 19.0 Mb, after fully adjusting for lower acres. Its very likely this crop can get bigger, along with just about all the other major producing countries. The more confusing stat is what to do with demand, as what started last Christmas is still running medium to hot. New crop sales are near the 10/11 record, so if one made the estimate based solely on previous years, the 17/18 estimate would be north of 15 Mb. We feel more comfortable getting supply right, and anguish over guessing exports.
Cotton numbers tomorrow are likely to be a bland event. The bigger rush will be in grain numbers, as they fully account for acreage and conditions and stocks. Cotton has been able to only tread water in recent weeks while grains put on a show. If Chicago cools down, cotton will have few friends. We remain negative, sell rallies.
The coughing, sputtering movement of the last 2 weeks looks corrective, and we lean toward Dec moving below the 6615 low, which we have as a 3 wave low. The 4 wave may be in place, so a new low is not far off. Even if the 4 wave high is not in place, the 38% retrace is at 6980, about 200 ticks up.
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