The Bears have extended their weekly winning streak to two, with the May contract giving back 102 points Vs this time last week. The May – July spread weakened, but remains well below full carry at (39); the old crop/new crop straddle remains strongly inverted at 456 with the Dec contract finishing the week at 77.66.

News this week carried both bullish and bearish flavors. The prospect for more rapidly than previously expected Fed interest rate hikes and the saber rattling around trade issues (especially with China) were taken as bearish factors. India’s estimate of a reduction in area committed to cotton by around 12% Vs 2017 was supportive, as were growing weather concerns across the US as planting season approaches.

Demand for US cotton remains very strong as merchants and marketing cooperatives attempt to off-load bales amid the steep old crop/new crop inversion.

Total net sales and shipments for the week ending Mar 15 were modestly higher Vs the previous sales period at approximately 343K and 445K running bales, respectively. Shipments eclipsed the weekly pace required in order to match the USDA’s export target. Shipments will now need to average 317K running bales per week to realize the USDA’s 14.8M bale target. They will need to average approximately 410K running bales for our expectation of 16M bales to be met. Total sales against 2018/19 were nearly 148K RBs; sales against 2018/19 currently stand at a running total of approximately 2.83M 480lb bales, which speaks well of overall demand.

For next week, the standard weekly technical analysis for and money flow into the May contract are turning bearish. The formidable on-call position held by mills remains a very supportive factor for our market, but the May contract is nearing its swan song, with scheduled index fund rolling scheduled to commence next week.

Next week will be truncated per the market’s observance of Good Friday, but the week will finish with the release of the US export report, which should once again feature strong figures, and the release of the USDA’s annual Prospective Planting report. The annual Bloomberg survey of analysts and traders showed an average expectation of 13.3M acres to be put forth in this year’s report. Low and high estimates were 13M and 13.8M acres, respectively, while our contribution to the survey was 13.5M acres.

Traders will continue to focus intently on droughty conditions across west Texas and Oklahoma while also becoming more attentive to wet conditions across the Midsouth and the southeastern states – we (Memphis, Tennessee) are slated to receive 6+ inches of rain over the coming days, with flood warnings having already been posted for most of the Mississippi River Delta and nearly all of AR.

Given the relatively undesirable precipitation levels this past week, producers both in and out of Texas have had plenty of time to follow the Dec contract’s action and mild selloff. With only 170 pts between the high on March 13 and today’s low of 77.26, it is a stretch to say we’ve seen a correction, and there is talk in trading circles that we need a 4-5 cent correction to fuel the next leg up if we’re going to see 80 cents before planting picks up steam.

There has also been more than a little talk in producer and merchant circles about the section 199-A “fix” in the latest omnibus spending bill. Rather than wade in over our heads here, it is worth noting that most (if not all) merchants are visiting with their attorneys and accountants to discuss the pros and cons of forming coops, and producers should make time in the next few weeks to visit with their own attorneys and accountants to be sure their own operations are properly set up to take advantage of current tax code.

With all that said, we still consider a Dec contract trading to or above 80 cents to be well within the range of possibilities between now and mid-May; 80 cents would be a fine place to have a solid 50% of your crop priced.

Have a great weekend!