The ICE Dec contract took a push on the week, finishing at 68.03. However, the Dec – Mar spread strengthened by 40 points to 33 points of carry amid continued strong demand for US bales
Other than continued beneficial showers across much of West Texas and major producing regions within India, not much has changed since last week. Suffice it to say the market continues to reflect this (see paragraph 1).
On the demand side, export sales remained very strong for the week ending Aug 18 at nearly 310K running bales; the US sold nearly 25K running bales against 2017/18. Shipments were impressive at 223K running bales. But strong sales were expected. The fact that producer fixations of on-call sales have all but dried up while mill fixations have increased notably over the last 2 weeks was also to be expected, given recent futures price action.
On the whole it certainly seems speculative liquidation has been greatly mitigated by strong mill interest all along the curve of the of the marketΆs current retracement to key support levels.
On the down side, with respect to production, continued overcast and damp weather across the Mississippi River Delta has incited disease pressure in this seasonΆs crop, with some target spot pressure in Arkansas reportedly being quite severe. Sadly, at the time of this writing, it is raining once again. And, while producers across both the High and Rolling Plains of Texas have enjoyed increased showers over the past fortnight, producers within the upper coast region have been inundated.
Once again, we end the week advising producers to hold tight, but to be prepared to take advantage of rallies into the low to mid-70s. As cotton continues to open in the cotton belt, the potential market moving potential of any weather event increases. Indeed, as of this morning, meteorologists were monitoring a tropical depression moving towards the Gulf of Mexico. There is no reason to suspect this will be the last potential storm to threaten the 2016 US crop.
As these potential threats develop, it will be useful to remember the old saw that the market tends to buy the rumor and sell the fact. Producers who havenΆt sold at least half their estimated production should have orders on file with their broker or buyer in the low-mid 70s. Those who are already 50-65% sold can likely afford to take more of a wait and see attitude.
For next week, the standard weekly technical analysis for and money flow into the Dec contract remain supportive, at least. And, on a weekly basis, the market remains somewhat oversold. Export sales for the week ending Aug 25 could again prove quite strong. The continued contraction of ICE certificated stocks, coupled with recent market support near 67.00 – 68.00, certainly suggest that such is apt to be the case.
On a negative note, although we think that there are few natural sellers near the current price levels, harvest pressure normally steps up by early Oct, at the latest. On a technically optimistic note, the market has got an overhead gap left to fill on either side of 73.00, basis Dec.
Have a great weekend!
