The two important numbers this week are zero notices, and China’s 85% of total sales. The no-notice was expected, as the May/July took away all of the mystery by dropping like a stone to -235 before the certs found a solid home. Some saw zero notices as bullish, but one has to wonder why it took full carry to entice someone to step up and take the 300 kb of certs. As for sales, with China in the mix they were very good at 132 krb. The ROW only bought 20 krb, and new crop sales have cooled off from a very hot pace, this week making only 20 krb. Sales need to average 44 krb to make the target, but if one adds a rollover of say 420 krb, then sales need to average 74 krb. As for exports at 238 krb, they were well ahead of the average needed to make the target, which is 189 krb.
West Texas weather shows little to no chance of rain. There are roughly 6 weeks left before insurance dates start kicking in. We have taken districts 2-N and 2-S out of the extreme drought category, leaving only 1-N, 1-S and 6 as extreme. Most of Texas is in fairly good shape, and for the first time in 4 years it appears the RGV will make a decent crop. However, Texas is all about 1-S, and there is nothing on the horizon.
Sales were better than expected, so prices near 92c have not been hurtful enough to dampen enthusiasm. Usually sales drift off this time of year but the last couple weeks have been impressive. Demand has been tepid for the ROW, but China has filled the void and continues to buy US after looking at other sources first. Checking basis levels they are about as low as any time in the last 2 years. The West TX (SLM) basis (chart below) has a pretty good inverse correlation with price movement, as one can trace the decline in the basis in the last few months vs a same-time rally in futures. Our guess is that the WT basis probably bottoms in -900 to -1000 area.
Not much change, as the 9400 resistance continues to check price advances. A reliable seasonal low is due around 8 May. July has strong support at yesterday’s low at 9073, which coincides with channel support. The 55 day average lies at 9023, rising about 11-15 ticks per day.