What a week of fun in the cotton market! Nothing reacts to a hurricane more than cotton, so the fun could extend into early next week. We have spent much too much time trying to estimate and calculate potential losses from Harvey, and in a nutshell, here is how we see it for now. 300kb lost in the fields in Texas; 200kb lost in module form; 50kb lost in Louisiana and the southern Mississippi Delta. 550kb maximum lost, off of a crop of 21.3 Mb. We have thus backed down our estimate to the 20.75 Mb area. When one considers that most estimates prior to the Aug report averaged 18.5 Mb, the market will eventually have to deal with a Sep report thats at least 2 Mb larger than early Aug numbers.
We think we have been fair, open and reasonable with guesses and estimates of the Texas situation regards Harvey. A lot of calls have poured in to this office about potential losses to the Delta, so the below spreadsheet was prepared to get an estimate of how many bales in the field could get wet in LA, Ark and MS. Call it 800kb today, and maybe 850kb by next Wed. A more difficult question is whether or not Harvey gets to our area at all, with lesser questions of precip amounts and longevity of the visit. Right now, it is unclear how Harveys remnants will track. A 3 rain would be unwanted on our cotton, but manageable. Maximum lost is 50kb, and we are much more concerned about boll rot and 2nd growth in LA and the southern Delta in MS.
Full disclosure here we didnt see quite a jump up in the market this week, and certainly did not see a -250 fall in 10 minutes today. This market will soon revert back to the same issues that are ever-present, those being a very tight carryin, good demand, and a monster world crop in the pipeline later. Harvey just made a razor carryin more tight, but the US and world crops are likely much larger than the Aug report. The only way out of a huge ROW carryout is for a large event from Mother Nature, or a government action. We remain negative.
For the 2nd time this month, cotton has made bearish engulfing patterns. These occur when the market opens at a new high, then falls below the close of the high day. Also evident on the chart is a rather large triangle, with support near 6660, and resistance at 7015. However, there is a lot of room to bang back and forth in, before breaking out. Sell rallies.
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