An announcement out of China this morning confirms that the CNCRC reserve release initial bid price has been lowered approximately 4% to $2783/MT (approximately $1.26/lb).
While this news is not supportive of ICE futures, the US situation remains tight and is likely to officially grow tighter with the release of the ginning report from USDA-NASS.
For the week ending Mar 20 the USDA-AMS has reported that a total of approximately 12.83M statistical bales of cotton have been classed with respect to the 2013 crop. Over the most recent week approximately 8K bales of cotton were classed with only TX reporting classing activity over the period.
Although the final ginning estimate, scheduled for release on Tue, Mar 25, is apt to be a little larger than the most recent cumulative classing estimate, it is very likely that the estimate will be 300K+ bales shy of the USDA’s current US production projection of 13.19M bales. Hence, we expect the ginning report to be very supportive of front month futures next week as a 300K bale reduction would infer a current 2.5M bale ending stocks estimate. The ginning report is also apt to be supportive, to a lesser degree, for new crop futures as well as the USDA’s 2014/15 ending stocks estimate could be inferred (from the initial estimate put forth at this year’s Agricultural Outlook Forum) as low as 4.1M bales.
The front month picked up 112 points on the week, which was on par with our expectations given the results of the latest USDA cotton export report. Dec 14 also met our expectations by breaking through the 80.00 level, but also failed to meet our expectations by not doing so with a bit more fanfare.
Looking forward, net sales against the current MY that are near 50K RBs (so long as shipments remain above 200K RBs) are likely to be supportive, as such will infer a slight tightening of the US S&D.
For the front month, our preliminary technical analysis suggests…
May 14 surged to a 113 point gain on the day, settling at 93.31, a new high settlement for the current bull move. Although resistance occurred per our expectations, directionally we were far from right, which increases the difficulty of writing this report. The settlement was within the upper one quarter of the front month’s 155 point trading range (92.05 – 93.60).
Technical bias for the front month remains bullish, and, although signs of the market becoming overbought are once again reappearing, this just tends to go with bull market territory.
For Mon, our directional bias is for…
May 14 lost 44 points on continued light trading today, settling at 92.18. The settlement was within the lower one half of the front month’s 114 point trading range (91.82 – 92.96).
Technical bias for the front month remains bullish, and signs of the market becoming overbought have mostly evaporated.
For tomorrow, our directional bias is for …
