Mr. Toad’s Wild Ride
In just 2 days, cotton has plunged, then rebounded, and established a 3c low-to-high, rejecting prices on both sides. This week has certainly not been boring, and its only 2 days old.
Listening to farmers and traders in W TX, the situation there is dire, or so-so. How one sees it probably has much to do with his position on the board, or in the field. Scanning the TX moisture profiles and conditions indexes, our bias is to see 1N and 2N as having issues, and 1S and 2S as muddling through. This may be the type year when yields and abandonments are sort of in the middle of a broad range, rather than the normal very good, or very bad.
For India, same old story, with Punjab and Rajasthan still dry in the western areas, but one report said subsoil moisture was very good, following the deluges of mid Aug. Cotton yields have rebounded from below average, to average.
W TX yields have suffered this month, and one has to keep chipping away from what was once a very good year. The rest of TX is in great shape, as we await classing data to roll in. So is the rest of the country, with record yields expected in some states. If yesterday’s low identified a bottom, today’s high identified a minor no-go. At least traders have a couple of parameters by which the market can prove itself. The cert stocks level, and the COTs remain extreme and extremer, while the $ refuses to confirm a top. And here it is the end of Aug, and no hurricane worthy of a name has come calling. We don’t want to sell 58c cotton, but can’t see a way out of the hole…yet.
If the rest of the week is as raucous as Mon and Tue, its going to be one wild ride. Month end on Friday may prompt some additional spec selling, adding to extremes in all categories of specs, commercials, indexes and swap dealers. IF this market is making a “pre-harvest” August low, it is normally followed by a rally in Sep, and then another low in late Nov/early Dec. Wait and see if either Monday’s low, or Tuesday’s high, are taken out.
As always, please use protective buy and sell stops when trading futures and options.
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