Trading on the ICE this week resembled that seen last week, with another crash (this time on Tuesday – and all the way down to 81.36) before recovering the vast majority of the day’s loss on Wednesday. The major focus/news for the week, other than far less than desirable weather conditions across the majority of The Belt, was the continued white hot pace of demand for US cotton for export.

Total net sales and shipments for the week ending April 19 were higher Vs the previous sales period at approximately 318K and 428K RBs, respectively. Shipments continue to surpass the weekly pace required in order to match the USDA’s revised 15M bale export target. Total sales against 2018/19 were again large at nearly 260K RBs; sales against 2018/19 currently stand at a running total of approximately 3.5M 480lb bales.

We continue to project 2017/18 exports at 16.4M 480lb bales – and the US is on (actually above) pace to meet our expectation.

Domestically, it either is or soon will be cotton planting time across the majority of production areas within the US. Planting conditions across the belt thus far have been less than desirable, to say the least. Two recent rain events across West Texas and Oklahoma were hit and miss with much less accumulation that had been hoped for. Cotton planting across South Texas is complete with early condition reports of the young crop mixed. The Delta and Southeasthave gotten behind on field work and planting due to cool and wet conditions.

While there remains plenty of time to get the seed in the ground, one thing for certain – this crop is not off to an early start.

Internationally, cotton news this week was again relatively quiet. Northern India and Pakistan continue to endure droughty conditions while international analysts (amid a bevy of domestic and international weather concerns) have begun to trim their aggregate world and US production forecasts for 2018.

Economic data released this week for the US was mostly positive, with the US Dollar Index continuing to move northward, which is not usually supportive of US agricultural futures prices.

Politically, it certainly looks as if the US and China are looking to avoid a full-scale trade war, with negotiations between the two economic powers expected to begin in the foreseeable future. Elsewhere, Kim Jong-Un has suddenly transformed himself into Mr. Congeniality with his recent visit to South Korea before a potential meeting on denuclearization with President Trump. While there is plenty of skepticism regarding the despot’s sudden development of a personality, such has probably had some calming to supportive effects on most markets.

While the increasing volatility in the Dec contract is a change from the steady trading we saw through much of late winter/early spring, it is well within seasonal norms. Given weather concerns across the US cotton belt (wet up north, dry down south), there is still plenty of fodder for a bona fide weather market in May and June.

With that said, we believe that in the medium term, the Dec contract has more potential above 80 than it does below 75, and producers can take a wait and see attitude towards pricing more than 30-40% of their estimated production. If producers do opt for the most conservative strategy (price it all now), we’d recommend a mix of Dec and Mar calls on top of their sales to take advantage of rallies later in the year.

For next week, the standard weekly technical analysis for and money flow into the July contract remain bullish. We continue to believe that the formidable on-call position held by mills – especially coupled by continued inclement weather conditions both domestically and abroad – present the potential for a sharp spike/rally against July at some point prior to the contract’s first notice day.

Have a great weekend!