Planting was reported as 95% complete on Monday, down only 2 pts from normal. Further, substantial rain relief in much of the driest portions of Texas mid-week were described as “game changers” for yield prospects by sources we follow who focus exclusively on cotton. But based on ThursdayΆs new 90-day forecasts from NWS (see maps p. 2) it still shows above-normal temps for the Southern Plains and Delta, with below-normal rainfall for prime Texas cotton country.

But what really muffles the rally potential for cotton longer-term was word out of China Wednesday that with the new crop year, Beijing officials will likely change their entire approach to price support for cotton farmers. Instead of buying up domestic production and holding it in “reserve” to boost prices, officials plan a program of subsidizing farmers directly when prices fall short of production costs, similar to the target price and deficiency payment concept in U.S. farm policy.

We have said for months that the world is awash in cotton stocks, but only if you count ChinaΆs share of more than half those stocks. But for months traders and analysts have discounted the reality of those stocks because China has held them tightly in reserve and even permitted its mills to continue importing U.S. cotton under a quota system.

We have also warned for months that Beijing officials could unleash those stocks “with the stroke of a pen.” That hasnΆt happened yet, but Chinese textile authorities are confident it will happen within the new marketing year and that means global cotton fundamentals must now be assessed at face value including ChinaΆs reserves and that dramatically limits rally potential globally.