The ICE May contract gained a very respectable 142 points on the week, although the bulk of the gain was the product of a late session, fervent rally to close out the week.

The July – Dec spread (straddle) continues to trouble merchants at nearly 400 points of negative carry.

US export business continues to dazzle, with total net sales and shipments for the week ending February 23 of nearly 490K (a marketing year high) and 330K running bales, respectively. It now seems a foregone conclusion that US exports will likely be realized at no less than 13M bales – and perhaps as much as 13.5M.

On the production side, Midsouth producers continue to mention to us their intentions to increase acreage further when planting season arrives. Rumors of cottonseed becoming scarce at some locations are supportive of this notion.

US planted area of around 12M acres is certainly not out of the question.

As of March 2 the USDA reported that it had cumulatively classed – almost to the bale – the currently projected domestic production of 16.96M bales. Hence, we think that 2017 production will ultimately be logged at no less than 17.1M bales and perhaps as high as 17.25M.

USDA will release its Mar WASDE report on Thursday, March 9, and although I have not yet completed my S&D analysis, it looks as if world production will likely be projected a bit lower versus last month, while aggregate world consumption may be projected a bit higher.

Domestically, USDA will likely not adjust its production estimate until April, at the earliest, but it will likely enhance its export projection to no less than 13M bales, and perhaps as far northward as 13.2M. Domestic consumption will likely be lowered at some point in the near future versus the currently projected 3.3M bale figure.

We were fortunate enough to be able to attend day one of the annual Midsouth Farm and Gins Show, held here in Memphis, Tennessee. We were able to speak with old friends from the trade and field alike.

Many of the producers who we have known for a quarter century or more we ran into had their wives on their arms, and it seems that they are invariably aging much more gracefully than are their husbands. As it should be, I suppose.

We even ran into trade friends from Europe as we made the rounds. On the whole, the mood was optimistic, very positive. And this is encouraging. It made the day pass much faster than it has in recent years.

Producers have all heard the joke about the farmer who was granted three wishes…

• For his first wish, he asked for dollar cotton, and got it.
• For his second and third wishes he continued to ask for dollar cotton, because he was so sure it would go higher that he didnΆt sell any when his previous wish had been granted (itΆs funnier told over a drink at the Peabody Hotel).

This might be a good time to review the moral of that joke.

Dec spent most of the fall hovering just under 70 cents, and most of the past few months languishing in the low 70s. ThereΆs been a nearly universal recommendation by cotton gurus to sell or hedge new crop against a Dec of 74 or better, and 75 is a nice, round psychologically significant number.

When Dec crossed the 75 cent line on Thursday, many producers followed that advice, and fixed or hedged a portion of their 2017 crop before the market took a 100+ pt. plunge.

However, many of the merchants we visit with told us that volume had vanished on Friday morning when the market returned to 75. They also said that the combination of natural farmerΆs optimism and a dose of bullishness from Joe NicosiaΆs talk at the Midsouth Farm and Gin Show had inspired producers to set their targets another one to five cents higher.

While we understand where theyΆre coming from, we still maintain that 75 cents is an excellent place to have 25% to 50% of your estimated production sold or hedged.

For next week, the standard weekly technical analysis for and money flow into the May contract remain bullish, although the market is again approaching an overbought condition.

Thursday will be a double-whammy report day with the weekly US cotton export report at 8:30 AM ET, followed by the Mar WASDE report at 12:00 PM ET. The market seems to expect a 300K bale reduction in projected 2016/17 domestic ending stocks and, while a reduction of 800K would not produce a classically bullish fundamental scenario, any reduction of 500K or more bales could move the market higher.

Have a great weekend!