In 1967 The Fifth Dimension recorded, Up, Up and Away. Certainly that is cotton’s theme song for now as it has locked onto that Beautiful Flying Machine, and tracts higher and higher toward 90 cents. Too, it looks like that beautiful balloon wi1l fly above the 90 cent barrier, but just how far can it go? The two principals making that decision are of course Mother Nature and the Magic Man in China that ultimately controls the key to the Chinese Cotton Warehouse.
Mother Nature always has her say, but the market can only assume normal weather patterns (whatever that might be). Market rumors will kill the crop two or three times before it is even up good and/or catching up to “normal” progress. Understanding that humans trade commodities and thus human emotions control trading, then it is evident that market prices run the gambit, up and down, of those emotions. Such emotions are very volatile at present, and are bringing more acreage back to cotton. Such is evident in all four regions of the Cotton Belt. It is not too late, and if December can top 90 cents before the end of March as much as 1.5 million acres will return to cotton; taking U.S. cotton plantings up to 10.5 million acres. Yet, for now, I will move my estimate of planted acres up to only 9.8 million acres, the current USDA estimate, but up 800,000 acres from the NCC estimate.
In its March supply and demand report, USDA increased U.S. exports another 250,000 acres, bringing its estimate up to 12.75 million. It is positive that USDA has a solid grasp of the increasing demand for U.S. cotton. Yet, it should be expected to see USDA continue to increase its estimate as the current pace, which suggests U.S. export sales will reach 13.1 million acres. With U.S. carryover now estimated at 4.2 million bales, the bets are on that final USDA carryover will be as low as 3.8-3.9 million. Other notable changes in the report were an increase of the Chinese crop (1.0 million) up to 35 million bales and a 500,000 bale increase in Chinese consumption, up to 36 million. The Brazilian and Pakistani crops were also lowered. Generally, world consumption was increased in conjunction with the increase in world production, leaving world carryover at 82 million bales. As I’ve stated several times, I feel USDA must come to grips with strong world consumption and lower world ending stocks, possibly as much as three to five million bales lower. I remain of the opinion that the market is telling us that consumption is stronger and stocks are smaller than the USDA estimates.
Export sales remain widespread across all world markets as mills pony up higher prices almost week after week for immediate delivery. The most recent week saw shipments climb to more than half a million bales, a seasonal high.
This will continue as Memphis merchants are scouring the countryside looking for cotton and buying anything that resembles quality. As one merchant was quoted as saying, “buy all if it.”
Old crop will test the 90 cent level…December should tag along, but I remain of the opinion that 86 cents is the pricing level for the 2013 crop. I hope it, too, climbs above 90 cents, but that is just not in the cards unless the new crop is killed coming up out of the ground.
Many were not going to plant cotton this year, or were going to make a significant reduction in plantings. If the shoe fits…..then….If You Like The Price Enough To Plant It Then Like The Price Enough To Sell It…