The bears caught a break this week with the March contract giving up 294 points. Still, the Mar contract has not dipped below 80.00 since Jan 11 (WASDE report eve). The Mar – May spread finished at (74) for the week, an increase of 100% Vs last Friday’s finish.

Marketing US cotton above 80.00, basis March, proved challenging, with export sales against the current marketing year finally falling off the weekly pace required to match the USDA’s export projection at around 73K running bales.

Shipments were lower Vs the week ending Jan 11 at just below 250K running bales – 113 bales shy of the weekly pace required to ship 14.8M bales by July 31. Cancellations were 250% of the most recent net sales figure, with Bangladesh and China representing the vast majority of cancelled commitments.

Sales against 2018/19 were strong, and ahead of those for the current MY for the first time thus far in 2017/18 at almost 108K running bales. Sales against 2018/19 currently stand at a running total of approximately 1.62M 480lb bales.

Considering the number of bales mills have purchased thus far in 2017/18, nearby needs may be well covered, with commercial users now potentially looking to take advantage of more attractive prices for new crop stocks per the market’s steep inversion for the old crop/new crop straddle. Note that sales could again pick up if the market dips significantly below the 80.00 level, basis Mar.

Internationally, there will likely only be modest adjustments made over the near-term to the USDA’s current marketing year estimates for nations within the northern hemisphere. Across the southern hemisphere, Australia has been dry of late. Ditto for portions of Argentina, while rains have caused later-than-average planting of this season’s crop in Brazil.

Projections of 2018 domestic planted area have begun to be disseminated. We have published an initial projection of 13.47M acres (up more than 7% versus 2017). Informa Economics’ initial forecast is nearly on par with ours while other early estimates are as high as 14M.

Coffee shops and gin offices around the Cotton Belt are full of talk of forward contracting. Several market gurus and merchants have recommended pricing 20% to 30% of your crop at 75.50 or better, and we add our voice to that chorus. With that in mind, a review of the growing open interest in ICE futures makes options more liquid than in recent seasons, and it’s hard to make an argument against investing 200 points in some slightly out of the money put options.

For next week, the standard weekly technical analysis for and money flow into the Mar contract remain bullish, with the market no longer in a technically overbought condition. The Rogers index fund roll will commence on January 30 and run through February 1. That event that normally pressures prices and often adds significant volatility to daily trading action.

Have a great weekend!