A leading analyst has warned cotton investors against taking notice of long-awaited official crop forecasts to be released on Friday, terming them "unreliable and meaningless".
Judith Ganes-Chase, the respected soft commodities analyst, dismissed as "fictitious" the first full estimates for the 2013-14 cotton balance sheet that the US Department of Agriculture will produce on Friday, noting that estimates were based on sowing intentions polls and historical yields.
"It should be remembered that the production numbers are not based on actual plantings or field condition," Ms Ganes-Chase, the head of J Ganes Consulting, said.
"The numbers are fictitious and don't really have any bearing on what reality may be and subject to huge revisions as a result.
"It is wrong for the market to show any response at all to these numbers one way or another because the data is unreliable and meaningless."
'Yields will be poor or abandonment high'
The likely reliability of the data, coming when only roughly 20% of the US crop has been sown, was especially questionable this year, when farmers may turn out to have planted "vastly" more acres with cotton than suggested by a USDA poll in March.
"The rise in price and weather-related problems for other farm crops… could have pushed more farmers to plant cotton," she said.
Investors are in particularly monitoring the progress of US corn plantings which, at 12% complete as of Sunday, were progressing at among the slowest paces on record thanks to wet and cold weather in the Midwest.
As an extra uncertainty, some early-sown cotton was already struggling in Texas, the top producing state, much of which is still in drought.
"This year's crop is not without issue and in some parched dry land acreage in Texas especially the emerging crop is not doing well.
"Yields will be poor or abandonment high in some pocketed locales and this is helping to push prices back up."
Strong exports
As an extra support for prices, in theory, Ms Ganes-Chase flagged the potential for the USDA to cut its forecast for US stocks at the close of this season thanks to a strong pace of exports.
The US has sold 11.8m running bales (of 500 pounds) of Upland cotton and a further 825,000 running bales of high-class Pima cotton so far in the 2012-13 season, which closes at the end of July.
The USDA is forecasting overall exports of 13.0m 480-pound bales for the whole marketing year.
"The strong sales data may force the USDA to once again bump the season export figure which would push the US cotton ending stock level lower," Ms Ganes Chase said.
China factor
However, the strong pace of export sales, including the 314,000 running bales of US cotton sold in the latest weekly data, was being discounted because of the reliance for orders on China, whose massive stockpiling programme at high prices is forcing domestic mills to turn to imports.
"An export sales report with new sales of more than 300,000 bales was actually fairly exceptional for any given week but especially for this late in the season and after sales all year far surpassed expectations," she said.
"The problem continues to be that China is the main buyer and this does not necessarily reflect strong underlying demand… but rather a pure cost issue with foreign prices cheaper.
"As much as China buys it could lead to auction sales of warehoused cotton at any time."