Doane Cotton Close: Prices Rebound with Outside Support

Finally a rebound after 10 straight losing sessions! Credit a rebound for the stock market and a breather for the red hot dollar. In hindsight, we should have been more aggressive pricing new crop during that 8-cent mid-January through February rally. The market has been slowly giving back those gains for 11 straight trading sessions thus far in March!Pre-release estimates for U.S. ending stocks averaged 4.2 million bales, unchanged from USDA’s February. That’s just what USDA did, leaving the balanced sheet unchanged. The only figure that changed was the upper end of USDA’s projected range for average farm price. That range is now 59.0-62.0 vs. 59.0-63.0 in February.Globally speaking, USDA raised beginning stocks slightly while reducing global production slightly. However it also reduced estimated global use for a net increase of 220,000 bales, to 110.86 million. This pushed global stocks relative to annual use from an already high 360-day supply in February to 362-days’ worth – essentially a fully year’s supply in ending stocks alone!China still accounts for 59% of those stocks, however, the same as last month. And since these are ostensibly held in government-owned “reserves”, some analysts discount their impact on the global balance sheet. But even if you subtract China’s production and stocks from the global balance sheet, ending stocks are still a 7-month supply, far beyond the 3-month supply considered the threshold of “tightness”.