Cotton managed to finish the week on a strong note due to an excellent weekly export sales report. Net Upland sales of 163,300 RB for 2013/2014 were primarily for China (83,000 RB), Turkey (23,700 RB), Thailand (14,700 RB.
Just a week ago the gap between where export sales YTD “should” be and where they stood was more than 70,000 bales. This weekΆs stellar performance alone narrowed that gap to 42,000 bales.
The only new news of significance for cotton early this week should have been at least a bit price supportive as well. In its weekly crop progress and crop condition report, NASS lowered crop condition ratings slightly. The portion of the crop rated “excellent” rose by a point, to 9%, but the portion rated “good” dropped by 3 pts, to 36%, for a net loss of 2 pts compared to last week. ItΆs still better than a year ago, but marginally. Last year, 42% was rated good excellent, 3 pts below 45% this year. In the “poor” to “very poor” categories, the numbers rose by a combined 3 points: 23% is now rated poor to very poor, up from 20% last week, but still less than 28% a year ago.
Ironically, just yesterday (ahead of the big sales to China) the news was that Chinese purchases of cotton from India are expected to fall as that countryΆs reserves have risen to unsustainable levels and more of the domestic crop is sure to be put on the domestic market in 2013/14. I said that was bearish because IndiaΆs cotton stocks are also huge and the rupee has declined so severely that India can readily offer bargain-priced cotton to the global market to counter the drop in sales to China. But then todayΆs export sales report showed that while China may have told India “thanks, but no thanks” (to more cotton), they were showing by their buying action that the opposite was the case for U.S. cotton!
It was all the more puzzling in that also just yesterday (Thursday), the International Cotton Advisory Committee (ICAC) has lowered its forecast for global cotton prices by another 5 cents per pound. ItΆs the third straight reduction and the group is now blaming increasing competition from polyester for curbing Chinese cotton demand overall.
Chart damage was severe this week, with December cotton breaking its uptrend line and opening up new downside risk to the 76-78 area. TodayΆs strong close did not undo that damage. And it could just be pre-weekend profit-taking by speculators who were short cotton futures going into todayΆs action.
Thursday USDA will issue another Crop Report and update its WASDE balance sheets. The best candidate for bullish surprise will be the U.S. average yield figure. If boll set was as disappointing in the S.E. U.S. as weΆve been told, anecdotally, that should result in a lower yield figure from August levels. Boll set in the Crop Progress report has caught up to the 5-year average. ItΆs 95%, just a point lower than the average 96% and just 2 pts lower than last yearΆs 97% figure. And that means fewer-than-normal bolls per plant should surely become apparent in USDAΆs September crop report if itΆs a problem.
