TodayΆs NASS report was close to neutral, if not a bit friendly, which may account for the slightly higher close in the December contract. Cotton planting is just getting underway in south Texas and will begin shortly in Louisiana, Mississippi, south Alabama and Georgia.
Texas planting has advanced to 6%, the same as last year and 1% less than the 5-year average of 7%. Most of the price action and volume is housed in the old crop months, which have had only a minimal impact on December of late.
Weather will become more important to new crop mid-April forward since national planting progress will be issued starting Monday, April 7. Tentatively, a rain event is forecast across west Texas (High Plains) this coming weekend, giving us an opportunity to see how the December contract reacts.
My technician, Dave, released his monthly view for April and it was a humdinger.
Anyone watching cotton is aware of its ongoing rally since last fall, with the month of March closing 6.38 cents higher. Nearly every major hurdle has been overcome and the underlying support from the oncall mill sales report assures ample support on any modest breaks.
Higher prices to ration US demand are necessary. But, thus far, sales continue to occur in the low 90s, suggesting at least mid-90s is necessary.
From a chartist outlook, clearing one last hurdle could lead to another leg up. I do not completely embrace DaveΆs opinion, but a solid close above 94.00 should lead to a retest of the 97.35 seasonal high and possibly a closer look at the 1.00 level.
Here are his thoughts for cotton during April:
“Last year, Nearby Cotton crafted a triple top at the 93.90 level and then nosedived into a three month drop to 75.27. Since then it has moved above all moving averages, closed higher in the third month,and this past week it jabbed above the old resistance of 93.90 on the fourth try. April is the fifth month of advance, so it has plenty of time to keep on going, or to back up a little first. Either way, it looks and feels like the bull trend will continue. Once it trades successfully above 94.00, swing measurements project Nearby Cotton to 112.60.”
Sharon C Johnson, @Copyright 2014
