We opined in this space last week that if another round of strong export sales data corresponding to the week ending July 28 occurred, our market would likely move higher with just short of 78.00 as an upside target.  Such occurred this week with Dec topping out the week at 77.98.

Total export net export sales (2015/16 and 2016/17 combined) and shipments were each very near 230K running bales.  If the US managed to ship just shy of 200K bales during the last three days of July, the USDA will have been spot on with its estimate of 2015/16 exports.  If not, total commitments against the new marketing year are very strong.  In order to be 100% committed against the new crop export target of 11.5M bales the US will need total net sales per week just shy of 170K running bales, which is not a tall order.

Perhaps most impressive is that the volume weighted average price over the most recent was again above the 73.00 mark, and the value of US currency was higher Vs the previous sales period.

And sales for the period ending Aug 4 could once again be formidable.

But, before we write this column another time, the USDA will have released its Aug WASDE report.  We can certainly see projected world ending stocks moving lower as reports come in about yet increasing demand and worse than originally anticipated production conditions in both India and Pakistan.  And others are looking for a significant trimming of the USDAΆs projection of 2016 US production.  But weΆre not so certain on this account.

Despite continued hot and droughty conditions across West Texas,combined with less than ideal conditions in other locales, the USDAΆs first objective yield survey on cotton for this year was actually conducted during the final 10 days of July. Hence, some of the data collected was from more than two weeks ago.  Too, the USDA often must augment their collected field data from July with historical averages.  These factors, combined with the constraints placed on the agency with respect to the amount that they may stray from results put forth from their models in consideration of either mitigating or aggravating conditions post data collection, suggest that US production will likely be projected close to last monthΆs 15.8M bales figure.  WeΆre thinking around 15.5M bales.

The results from the Aug objective yield study will have updated certified acreage data to consider and much more complete data from the field.  The Sept report is usually much more telling of ultimate production than is the one put forth in Aug.

This weekΆs rally has given producers another opportunity to price a portion of their crop. While the basis is widely varied among merchants, there are good contracts to be had, and we think it makes sense to have between 1/3 and ½ your production priced. Beyond that, however, friendly fundamentals and the fact that the basis is not universally aggressive suggest there may (the operative word being “may”) be better opportunities later in the season, especially for premium qualities. Once again we find ourselves advocating March or May puts to hedge at least ½ your unsold cotton, giving you insurance against an unexpected selloff.

For next week, the standard weekly technical analysis for and money flow into the Dec contract remain bullish, but the market also is moving further into overbought territory.  Export sales for the week ending Aug 4 could again prove supportive to bullish.  However, it will likely be next FridayΆs WASDE report that ultimately tells on which side of this weekΆs settlement our market will finish next week.

Any daily settlement above 78.00 sets up a realistic opportunity for Dec to challenge 80.00.

Have a great weekend!