Cotton put in an impressive technical performance yesterday and an even more impressive one today, given the bearish news from China. First, hereΆs a look at Dec. 2014 cotton futures:

HereΆs why IΆm impressed that new crop cotton could actually make a second straight higher close: Recall IΆve been warning for a year that if China ever changed its policy of buying up its domestic production to support prices to one where they let global market determine price and just support farmers with deficiency payments?

Well, we saw a MAJOR report out of China overnight where Beijing leaders announced thatΆs just what they plan to do: Move away from domestic prices that only fill up government warehouses with domestic production while mills import much cheaper cotton from abroad, to one where they will loosen the fetters on both imports and exports and adopt a more GLOBAL market-oriented policy!

I would have thought todayΆs news out of China would hammer cotton futures limit down. But traders took it in stride. That tells me that the most recent price slide in cotton had been tied to ideas that todayΆs news was “coming” and so much of the bearish impact is already “in the market”.

Time will tell. All depends on how quickly China begins to execute this transition in policy. I think todayΆs action implies the expectation that it wonΆt really begin to take effect until the 2014 crop. If instead we find out the changes are going to be more abrupt and immediate, I still think it could mean as much as 10 cents down for global cotton prices. WeΆll be watching the Chinese follow-up on todayΆs news like a hawk for that reason!

NO CHANGE IN ADVICE. My view remains that this latest break in cotton futures over the last couple of weeks has only intensified producer intentions to scale back acreage for 2014.