The market faced an uphill battle all week, and actually lost some momentum, but came back at the end of the weekly trading period to post a close above the December trend line. Thus, while the bull was scratched, he is still on the loose. Nevertheless, a good rain over the High Plains and the Rolling Plains will send prices lower.

Using 78 cents and better as a marker, price 35% of your 2018 crop.There will still be 65% of the crop left to hopefully hit the grand slam. Price 35% and HOPE you are wrong! The remaining 65% will get that big price and at the same time you will have prevented a financial disaster should prices drop.  Do not let a price that is very high in the upper one third of the historical price range pass you buy.

In the absence of any fundamental news cotton prices were under pressure all week as rumors floated everywhere with respect to lost markets due to the imposition of U.S. tariffs.  Those concerns are rather hollow for cotton and other field crops as well. Nevertheless, traders react negatively, or bearish to market uncertainty. Thus, in just two past two week trading period the technical picture for cotton has turned away from a strong bullish position to simply trying to hold the 78 cent level, basis December futures. Today’s strong close was helpful and the market continues to find support from very impressive export sales and shipments. Additionally, the increasing on-call sales position faced by textile mill buying continues to suggest a bullish market in the April-June period. Too, the low level of certificated stocks may prove to also support higher prices in the May and July futures contracts.

The Chinese reserve auction remains active, but is not finding as much demand as in the prior two seasons. Nevertheless, the first two weeks indicated an average of about 100,000 bales a day in sales.  Chinese mills have complained that the stocks offered at auction are of poor quality and have petitioned the government to allow more imported cotton into the country. The auction includes only 2011 to 2013 crop cotton, mostly of poor quality. As such, government pre-announcements have stated that additional cotton from the U.S. will be allowed to come into the country (increased U.S. exports). Again, as stated last week, the U.S. is the only country that has a ready availability of cotton. Other countries could make such sales, but would then have to come to the U.S. to meet their needs. Other suppliers are simply either out of cotton or nearly out.

Net exports of U.S. cotton on the week were 338,400 RB of Upland and 4,100 RB of Pima. Sales for 2018-19 included another 147,500 RB. This shipment pace represents very significant sales and have become the norm. Shipments totaled 425,100 RB of Upland and 19,700 RB of Pima. The export sales and shipment pace are one million bales above the USDA estimate.  Such a pace will work U.S. carryover down below 4.0 million bales and keep a fire under the market.

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