The International Cotton Advisory Committee (ICAC) based in Washington updated its global supply/demand forecasts today and still shows substantial contrast with USDA’s latest WASDE balance sheet for global cotton.
USDA puts beginning stocks at 100.56 million bales while ICAC’s forecast (in metric tonnes) works out to 92.2 million bales. USDA pegs 2014/15 global production at 116.42 million bales while ICAC has it at 116.6 million.
USDA puts global use at 111.34 million bales, while ICAC projects it at 112.5 million. So they’re not too far apart on production and use but with significantly lower beginning stocks, ICAC projects 2014/15 ending stocks at 96.3 million, substantially lower than USDA at 105.68 million bales.
Considering the grains were pummeled again today, for cotton to close in the black gives further hope that that we’re running out of willing sellers at these levels. Even the ICAC numbers show global ending stocks rising on a year to year basis, just not from or to the same levels as USDA’s numbers. It’s hard to be bullish when even the most bullish forecasts are still suggesting ending stocks will rise. Indeed, global fundamentals remain remarkably bearish. USDA’s ending stocks forecast translates to an 11.5 month supply at current global annual usage.
I still see downside risk for December futures to the low 60s. But the market is oversold and we could get a modest rebound back to the high 60s, but it will be a catch-up selling opportunity, not the beginning of a new bull market.
Yesterday’s NASS report on crop conditions and crop progress had little supporting news for cotton. 52% of the crop is rated good to excellent, down just a point from last week and still better than last year’s figure of 44%.
The portion of the crop rated poor to very poor was unchanged from last week at 14% and still 10 points lower than a year ago when 24% was rated poor to very poor.
NASS reports cotton squaring at 85% up 3 pts from the 5-year average and 9 pts ahead of last year. NASS says 38% of the crop is setting bolls, up a point from the 5-year average and 12 pts ahead of a year ago at this time.
