We close out this week with some encouraging news on the weekly chart:

Last weekΆs dip down to “test” the longterm uptrend line seems to have held and now this week we show a second straight higher weekly close, albeit pitifully small. Nonetheless, hereΆs the weekly cotton chart: Unfortunately, the global fundamentals are simply so overwhelmingly bearish (if you count ChinaΆs enormous reserves as part of projected global ending stocks) that I cannot see rally potential much beyond 82 at best. And the best hope for getting even that high again lies with growing trade suspicions that we could see another drop in cotton acreage in the U.S. next year. ItΆs a minority view, with one widely-watched Doane competitor out with a forecast for cotton acreage to RISE by about 600,000 acres in 2014. For my part, I expect cotton acreage to decline by at least 100,000 acres.

HereΆs the week in review: In last FridayΆs WASDE report, USDA put cotton production at 13.11 million bales, almost 200,000 below the average pre-report trade estimate. Ending stocks rose by just 100,000 bales vs. pre-report trade estimates averaging a 300,000 bale increase. So the U.S. balance sheet adjustments were price friendly.

Globally, however, the adjustments to the cotton balance sheet were neutral to somewhat bearish. USDAΆs September WASDE report put ending stocks at 94.73 million bales, already very burdensome at 86% of annual usage. Then Friday the estimate rose by a net 980,000 bales, to 95.71 million, or 87% of global use; nearly an 11-month supply!

Even if you donΆt count ChinaΆs share of global stocks currently in “reserve” and “off the market”, the figure drops to 37.9 million bales and thatΆs still a more-than-adequate 4-month supply. But weΆre setting stage for a significant acreage cutback in 2014 and after this long decline, see no good reason to price any new crop cotton.

NO CHANGE IN ADVICE. My view is that the worse this market gets from here, the bigger decline weΆll see in cotton acreage in 2014, possibly even worldwide.