By admin       2018-09-17

The visions of a return to 90-cent cotton appear to be fading. The good news is that the market is clearly showing signs of good support at roughly 82 cents. Support is a good thing; but prices (Dec futures) have struggled to clear a hurdle at 85 cents—we’ll first have to clear 85 if we hope to reach 90. Producers looking for an opportunity to add on to earlier sales, support is good but a rally is even better.USDA’s September estimates raised the US crop to 19.68 million bales—440,000 bales higher than the August estimate. The 2018 forecast yield was lowered just a bit but acres planted was raised 520,000 acres. The US crop is still a big unknown. This is one thing giving us support. Texas, as of Sept 9, is 62% poor to very poor condition. The September USDA numbers lowered the Texas state average yield to a projected 694 lbs/acre—down from 726, but added roughly 200,00 more acres to be harvested. US exports projected for the 2018 crop year were raised 200,000 bales from 15.5 million bales to 15.7 million. World demand is strong but there is some skepticism within industry about whether or not USDA is over-reaching a bit on its export number. 2017 crop year exports were 15.85 million bales. Compared to the August estimates, China’s production for this season was raised 1 million bales; India production was unchanged; Australia production was cut 550,000 bales and Brazil raised ½ million bales; Chinese imports and use were unchanged; Bangladesh and Vietnam imports were unchanged. Although prices appear to have good support, producers should be 50% sold or better at this point. The current level of prices (in the 82 cent neighborhood) is disappointing compared to where we have been. But if you’re not already at the 50% level, you also need to think about guarding against this market going to less than 80 cents and you being at-risk with most of your crop. On the other hand, if you are already 50% or more priced, rallies to the 85 cent area could be a good opportunity to add further to sales—unless you want to take the risk of holding out for 85 to 90—but then realizing you’re also taking the risk that the current level of support will hold.

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