Dec 15 futures meandered and wandered at 64.10c during what we would term prime-time for planting decisions. This was the worst meandering for the last 6 years. Going from 2014 to 2010, new crop Dec price averages during those years were 7788, 8043, 9130, 10967, and 7380. So comparing this year with the last 5 is very painful. However, if we compared this year to the period from 2009 back to 2004, it’s a whole different ballgame. Those price averages going backwards were 5269, 7708, 5908, 5904, 4984, and 6715.
The last 6 years were a panacea for cotton, closely paralleling the bounteous period in grains beginning with the Easter freeze of 2007 which sent wheat prices on a triple play. Every year since 2007 there was at least one major weather event in the world and a continuous row crop battle for acres to satisfy tight carryouts.
It may be a pure Biblical thing, with 7 years of plenty to be followed by 7 years of want. This is the first year with the beginning not facing an acreage battle or a severe shortage of a particular market.
Even though we are mildly friendly to cotton near term, we still think that cotton will be mired in a long term basing action required by textbooks following big bear markets. Cotton based from 04 to 07 in a narrow range, and is very limited to upside movement by alternative row crop prices. At 85c cotton would be in rough parity with corn and soy, but it is highly doubtful cotton can get within a dime of that parity level. The most obvious bullish aspect of this market is the cert stock level, which at 6k can be squeezed by a couple of small merchants on Cotton Row.
Last year cotton made a major high on 3/24 at 9735 and from there began the bear market. Be mindful of timing for the 360 cycle on 3/19 (Thursday this week) and the one year anniversary. We are still looking for that elusive Mar seasonal high, but this year’s event will be a very mild one, if at all.
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