I think “WOW” is the most succinct (and colloquial) manner in which I can express my attitude regarding the pace of US export business.  I did not see it coming, and therefore my latent cynicism suggests that someone (other than me) is very incorrect about overall demand.  I think that it is the USDA, but more on that a bit later.

Despite rising futures prices – basically in any manner in which one cares to parse and analyze them – strength in US currency, stock being certificated and a weakening nearby spread total net sales and shipments against the current MY for the week ending Feb 16 were nearly 400K running bales (with almost an additional 130K sold against the 2017/18 marketing year); shipments were very strong at just above 350K running bales.

For what itΆs worth, I didnΆt expect export sales to drop off the proverbial cliff, but I was thinking 200K, 250K tops.

This topic was, of course, batted about by many attending yesterdayΆs Better Cotton Initiative meeting here in Memphis.  Of course, I offered no opinion on this subject in the company of friends and associates from the merchant community, seeing as I have not sold the first bale of cotton this year (or ever) and they are the ones on the front lines making those sales each day.

I had planned to say how nice it had been to fraternize with many of the folks from the trade that I have worked or become acquainted with, or just bellied up to some bar with at some trade show or convention.  But, after waking up to an export report that was aggressively bullish, I realized that at least one of those old friends could have whispered in my ear what was actually going to occur this morning.  Although the report was discussed at length, every merchant in attendance held steadfastly to their poker faces.

IΆll see many of them again at next weekΆs annual Mid-South Farm and Gin Show (also here in Memphis) and I have decided to let them pick up their own bar tab, should I again have an opportunity to imbibe.

Regardless of the bullish business environment that US cotton currently finds itself in, the USDAΆs 11.5M planted acre projection (with an associated production projection of 17M bales) kept todayΆs rally in check.  The USDAΆs initial 2017/18 balance sheet was bearish, although less so than the projections put forth by the National Cotton Council earlier this month.  The USDA pegged US and world ending stocks on July 31, 2018 at 5.2M and 83.9M bales, respectively.  Again, for what itΆs worth, I think that the USDAΆs domestic production projection is likely a bit conservative.

These are not, on the surface, bullish expectations.  However, some will point to the levels of stocks when aggregating, parsing or excluding certain nations for analyses in trying to spit shine these initial balance sheets.  For us, it was the expectation that the US will garner in excess of 37% of world trade during the upcoming marketing year that is potentially very supportive.  After all, are we not now witnessing the market buoyed, at times, and propelled at others by the lust for US cotton?

Interestingly, many producers are not yet contracting cotton. Maybe they know something I donΆt, because the bearish planting intentions have me concerned about the long-term health of the Dec contract.

ItΆs also more than a passing possibility that many producers are remembering last yearΆs rally to 78 cents, or the fact that the Chinese reserve cotton hasnΆt diminished demand for US middlings over the past couple of seasons. ThereΆs also the possibility that many producers, seeing the major merchants lined up at the same price are waiting for one or more of them to break ranks and offer a more aggressive basis.

It could even be that producers are waiting to hear what Joe Nicosia has to say at the Mid-South Farm and Gin Show on Friday, Mar 3.

At any rate, IΆm sympathetic to the basis argument, and a lot can happen between February and November. But I also think a smart producer will have ¼ to ½ his crop priced in some fashion prior to harvest, with put options being the most versatile method of doing so.

For next week, the standard weekly technical analysis for and money flow into the May contract remain bullish, with the market having worked away more of its recent overbought condition over the course of the week, despite the higher week-on-week settlement.  And, although we think that the 77.00 – 78.00 area is a fine place for either speculators or producers to sell May cotton, the 8M+ bales of mill on-call commitments through the end of June will likely keep solid support under this market for the near- to medium-term, at least.

Have a great weekend!