By admin       2018-06-18

Finally, China approved on Thursday an additional equivalent of around 3.7M bales of cotton import quota, bringing the total to around 8M bales. The additional sliding scale quota is reportedly earmarked for privately owned mills. Given these announcements, it seems that the affect of the imposition of $50B in tariffs on imports from China are unlikely to markedly affect sales of US cotton into China over the near-term. Too, the cessation of joint military maneuvers between the US and Sorth Korea could ultimately prove to be a positive factor in trade negotiations. Forward contracting activity slowed this week, which also correlates with the aforementioned slowing of new crop sales. Producers have been steady sellers on each leg up since we breached the 80-cent level, and many producers have committed 60-70% of estimated yield. This is a particular problem for growers in the High Plains, as their weather to date makes even average yields look optimistic. Given continued demand for US cotton, and the fact that tariffs have yet to be a major factor in rationing US cotton consumption, it is not unreasonable to see this week’s action in the Dec contract as ordinary contraction in a sideways trading market. Producers who have sold 50-75% of their estimated yield should avoid panic selling into further drops into the high 80s. With that said, we’d hate to let a week go out without reminding producers that the option pit is a wonderful place to buy security, cure indigestion and sleep better at night. If this week’s market action has you looking for whisky, Rolaids and cigarettes, consider calling your broker. For next week, the standard weekly technical analysis for and money flow into the Dec contract remain bullish, with the market remaining in something of an overbought condition. However, it could well be domestic that decides next week’s market action.

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