The Dec contract was a weekly loser once again, with the contract giving up 138 points to finish at 83.92. Despite Dec’s loss, the contract failed to take out last week’s low of 82.94. The Dec – Mar spread weakened this week, but remains inverted at 26.

In its annual report, the USDA estimated 2018 domestic area committed to cotton at 13.5M acres (13.3M upland). This figure is 7% above 2017 but well below most pre-report expectations.

Our own pre-report projection was closer than most at 13.43M acres. Planted area is estimated higher in nearly all states Vs 2017, but 56% of estimated area is within TX, where droughty conditions are already forcing abandonment of both irrigated and non-irrigated fields.

Many traders and analysts (including us) will spend a portion of the weekend applying the USDA’s acreage estimates to their S&D balance sheets. On the whole, we think the market is now looking for a significant reduction in the USDA’s domestic production projection (19.5M bales) in the July WASDE report.

Cancellations of US old crop commitments continued for the week ending June 21 while new crop sales continue to mount. Total net sales against 2017/18 were approximately 17K running bales while shipments were significant higher, at just short of 390K running bales and well ahead of the pace required to meet the USDA’s 16M bale export projection.

Total sales against 2018/19 were significantly lower Vs the previous sales period at around 196K running bales; sales against 2018/19 currently stand at a running total of approximately 5.65M 480lb bales.

We continue to project 2017/18 exports at 16.4M 480lb bales.

For next week, the standard weekly technical analysis for the Dec contract remains supportive, but continues to move toward neutral; money flow into the contract is bearish.

China’s tariffs on cotton – and other commodities – are scheduled to become effective on July 6, and the market will likely closely monitor newswires for any trade negotiation developments ahead of next Friday’s deadline.

The combination of the Planted Acres report, a shortened holiday trading week, and the potential for market moving news on tariffs by week’s end will inspire indigestion for producers with un-priced cotton. We’re entirely sympathetic, and the combination of potential market movers will be looming over our own celebrations like distant thunder at a picnic.

With that said, however, we continue to see demand at strong levels, and see the Planted Acres report as supportive in the medium to long term. To date, cotton has weathered the trade war better than other commodities, and we believe it will continue to do so. We don’t see attractive new crop pricing opportunities emerging this week and believe most producers can focus their attention elsewhere and let their brokers pay attention to the market.

FARM BILL

On a final note, the senate passed their version of the farm bill this week, and it primarily makes incremental changes to the existing farm program. Of particular concern to southern producers, however, is a payment limitation amendment sponsored by Chuck Grassley that many believe has grave implications for cotton and rice producers. If you have an opportunity to visit with your congressman or senator this next week, encourage them to let the Conference Committee know how you feel about farm bill provisions that penalize your crop.

Have a great Fourth!