Another weak close for Friday continued to peel back the August rally. Export sales were delayed a day because of MondayΆs holiday, but were off from last weekΆs stellar performance. Nonetheless, export sales YTD in this young season (just begun Aug. 1) are running nearly 860,000 bales ahead of where they need to be to warrant USDAΆs current forecast for 10.7 million bales in 2014/15 exports.

WednesdayΆs rebound was modest, but impressive in light of the beating absorbed by the other major field crops! The strength surely didnΆt stem much from TuesdayΆs weekly crop condition ratings. Yes, the cotton condition rating slipped a point, to 50% good to excellent. But a year ago the figure was only 45% and yet last yearΆs yield averaged 821 lbs per acre, a pound more than USDAΆs 820-lb. yield estimate for this year. Meanwhile, the portion of the crop rated poor to very poor was unchanged for the third straight week at 16%, down substantially from a year ago when 25% rated that poorly.

The International Cotton Advisory Council (ICAC) came out with a new global forecast that helped peel back the August rally by putting global production at 119.6 million bales, well ahead of USDAΆs August WASDE estimate at 117.64 million bales. The ICAC world ending stocks figure is still lower than USDAΆs, however, and yet traders reacted bearishly to their report overall. Why? Because ICACΆs beginning stocks figure is 5.6 million lower than USDAΆs.

So by using USDAΆs beginning stocks and ICACΆs production and consumption estimates, the “adjusted” ICAC ending stocks net out to 107.8 million bales, 2.7 million higher than USDAΆs August WASDE estimate. Further, China estimated this yearΆs crop at 30.9 million bales, up from USDAΆs current forecast of 29.5 million. India has a huge crop coming as well.

U.S. production is also likely to be raised in next weekΆs September Crop Report as well, based on comparatively better crop ratings than last year and yet a current yield estimate a tad below last yearΆs. But it could be largely offset by a hike in USDAΆs current export estimate with sales thus far in the marketing year just begun Aug 1 well ahead of the pace needed to warrant the current estimate as noted above.

Longer-term, the cotton outlook was pressured by ChinaΆs announcement late last week that put a target price for its farmers of $1.29 per lb. ThatΆs still far above global market prices and a powerful incentive to keep production strong even though the Chinese government will no longer buy up the crop at an unrealistic price; but just make up the difference in deficiency payments instead to keep domestic prices more competitive with global prices and reduce demand for imports.