Export sales for cotton continued to fall, IndiaΆs monsoon is progressing and China may be implementing a pricey import tariff. There are two reasons that we saw small sales this week: the first one is due to unwilling sellers and the second is that there isnΆt much of the crop left to be sold. Losing 226 points from last Friday, December cotton closed this week near two week lows.

When breaking up the cotton growing regions, each one reported inactivity this week that involved light supplies and little offerings. East Texas was the exception where trade activity was moderate and interestingly enough is reporting yields up to 1,000 pounds/acre. The Northern and Southern Delta received beneficial rainfall while the Southeast remained dry. Fields in West Texas are stressed as the beginning of the week was dry with high temps (104 degrees), but some rainfall was seen today.

There are some stubborn bulls that are holding onto the fact that the NASS is showing deteriorating crop conditions but it is looking better than last yearΆs and harvest is progressing just fine. We are expecting world production to see a revision higher with the largest jump in India and Informa seems to agree. This morning they reported their estimates for the world and U.S. cotton crop: their world production number was raised to 119.7 million bales while U.S production estimates were raised to 17.78 million bales. The USDA currently has 117.64 million and 17.5 million respectively. This is a huge crop. Last season, we had a crop size under 13 million bales while the world number was around 118.27 million bales.

When considering that we havenΆt seen prices this low since early 2010, we should bear in mind that this huge crop is already priced in. It would take something drastic for the market to break below 60¢ – one of those drastic somethingΆs being policy details from China rather than rumors. If youΆre a bull, youΆll need to see some radical weather changes. Be ready for either but this is a bear market.