Here’s the week in review: Tight deliverable stocks have fed persistent short-covering by specs who don’t want to get caught in a squeeze by longs demanding delivery against March futures contracts. This, in turn, has given technical buy signals to attract even more spec buying as well as commercial buying with futures now into the mid-60s and poised to enter the upper 60s or even low 70s, our “best case scenario” for new crop. That’s why we believe it prudent to commence a scale-up pricing strategy after months of cotton prices in the doldrums.
India gave traders a bearish jolt this week by pegging their crop at 35.5 million bales, 5 million higher than USDA’s estimate back on Feb. 10. But because they didn’t project exports any higher than USDA, it gave traders only brief pause.
But then USDA followed yesterday with another disappointment to market bulls. Just last week the National Cotton Council released the results of their annual planting intentions survey this week and the data indicated that farmers will reduce acreage to 9.4 million acres, compared to 11.0 million in 2014. But at this week’s annual Outlook Conference, USDA issued a preliminary (non-surveyed) estimate that 9.7 million acres would be planted. (Results of the annual survey of producer intentions won’t be released until Mar. 31.)