Spreads vs Futures
The leading Dec/Mar spread dropped to -250, right at 88% of full carry.  That should do it.  The build in certs pushed this spread out from -50 at the beginning of the market year, when certs were sub 5k.  Now +120k, there are enough there to warrant similar carry all the way to July, if the balance sheet does not change much. 

Early yields out of W TX show what one would expect, another horrible finish.  TX abandonment for the state is at 43%, and yield avg is 760 #/a.  We haven't gone through the state districts in a few weeks, and will take a hard look shortly.

Notices?  Our guess is 60% of the certs, maybe more.  Most of the certs are new crop, and have a safe owner with carry almost at full.  This should be a good year for merchants, with large exports and partial carry all the way to July.  Then there is that 300 point invert.

Varner View

Cotton managed a boost today on the backs of the Chicago markets, and a little relief when Dec/Mar traded to almost full carry.  That means no fireworks in notice.  OI has dropped to only 2.6k, and after tomorrow will certainly be – 2k.  There's nothing left to play with.  One major irritant for the large spec long position is that they were forced to roll anywhere from -50 to -250, or exit the playing field.  OI is down 35k so it does look like some of the long specs have bolted for the door, to avoid paying up to keep a long.  This spread action has pushed Mar to above its avg of the range since 12 Oct (6890/7325).  That same action pushed the Dec to slightly below its range avg of the same period.  So for 6 weeks, this market has essentially gone nowhere.  We get the idea that if cotton was trading in isolation from soy, it would be at 65c today.

Technicals

Regards Mar, the leg down to 6891 on 11/02 is either a wave 1, or the A leg of a correction.  We will call today's minor high at 7260 the B leg, or perhaps wave 2.  The next move should be down, and confirmation this view is right will be a violation of the minor low of 7018 on 11/13.  There are many targets to calculate for a move lower, the first is 6824.  A close below 6824 would do damage to the chart, and turn near and intermediate trends lower.  The seasonal history argues against a downturn, as it is positive into 1/02.  Mixed signals, but we lean negative.