On Monday, we saw the biggest single session plunge in months on news that China was going to lower its price for Reserve cotton to domestic mills for the first time since last November. The bigger news was that Beijing made the announcement without any reference at all to easing import quotas in conjunction with purchases of state-owned cotton.
Tuesday we got an exaggerated move to the upside following a report showing ginnings YTD about 2.5% lower than one would have expected if USDA’s current production estimate for 2013 is correct. That doesn’t seem like much, but it works out to over 300,000 bales “short of expectations”. With projected ending stocks already somewhat tight at 2.8 million bales, the idea that ending stocks might be only 2.5 million bales or even lower spooked another big spike to the upside because that would be less than a 70-day supply in a market where a 90-day supply is considered the “threshold of tightness.”
Monday USDA will release prospective plantings. Based on our recent poll results, we suspect the increase planned for 2014 may be a bit larger than what is expected. (Watch for a special website update on the report and market reaction by noon Monday.)
This week’s export news was mixed. Actual loadings for the week were down 21% from last week and 16% below the 4-week average. New weekly sales reported Thursday were up 31% from last week’s dismal number, but still 11% below the 4-week average. Sales YTD are now running a 110,000 bale deficit from where they should be to sustain USDA’s current forecast for the marketing year.
There have been some torrential rains in Australian cotton country this past week that caught a lot of that country’s cotton with bolls open. That will hurt quality and could shift some new business to the U.S.