NY futures were basically unchanged this week, as December gave up just 55 points to close at 103.29 cents.

Despite a 649-point trading range and a slew of new data, the December contract settled little changed from a week ago. Trading volume was light, averaging just over 20k, while open interest dropped about 1.5k to 209.7k contracts.

The much anticipated WASDE report came in on the bearish side, showing a bigger US crop, almost equal global production and mill use, and higher US and global ending stocks.

US planted acreage rose from 12.48 million to 13.79 million acres, while harvested acreage increased from 7.13 to 7.88 million acres. Yield was three pounds lighter at 843 pounds, which resulted in a crop of 13.83 million bales, or 1.26 million bales more than a month ago. US exports increased by 0.6 million bales to 12.6 million, which gave us higher US ending stocks of 2.7 million bales, up 0.9 million from last month.

While the US crop estimate was too low last month, we believe that the USDA is now overshooting the target. A number in the low 13s is more realistic in our opinion, given the recent setbacks in the Midsouth and Southeast, where excessive rain has caused boll rot.

Global numbers showed production at 118.45 million bales (+1.44 million) and mill use at a nearly identical 118.63 million bales (-0.46 million), resulting in a jump in ending stocks of around two million bales to 84.75 million bales. Even though the USDA has finally started to address its mill use number, it remains overstated in our opinion. Mills are still sitting on yarn and cotton inventory and are running significantly below their normal pace. We therefore expect to see additional cuts to global mill use as the evidence of slower consumption mounts.

When we look at ROW (rest of the world) numbers, there is a projected ROW production surplus of 9.32 million bales, which is supposed to be absorbed by Chinese imports of 9.0 million bales. However, not only do we believe that the ROW production surplus is going to be bigger, but we also feel that Chinese imports won’t reach nine million bales. Last season they amounted to 7.84 million bales and China is currently buying at a much slower pace. With Chinese prices still about ten cents below US prices, it doesn’t make sense for China to import that much cotton from the ROW.

After a hiatus of four weeks, we finally got some US export sales data this morning. Net sales of Upland and Pima cotton totaled 604k running bales for the current marketing year and 220k RB for the next marketing year. Shipments amounted to 963k RB for the four-week period. Considering that we are in between seasons and that new crop is facing some challenges, these numbers were quite supportive!

Total commitments for the current season are now at 8.3 million statistical bales, of which 1.45 million bales have so far been exported. These numbers compare to 6.65 million bales in sales and 1.25 million bales shipped a year ago. Assuming that exports will amount to 12.6 million statistical bales for the season as estimated by the USDA, weekly shipments will have to average only about 240k statistical bales, which seems very doable.

The CFTC on-call report still showed 9.12 million in unfixed sales for the December to July contracts, of which 5.37 are on December alone. These numbers are not quite as dramatic as a year ago, when 14.64 million were open for the same period. However, we are dealing with a crop that is about four million bales smaller, so the impact of these unfixed sales could still be significant and it is one of the main reasons why we would avoid shorting the NY futures market if possible.

The US Consumer Price Index (CPI), which came in at a higher than expected at 8.3% annualized, rattled financial markets on Tuesday, as it became clear that the Fed would not be able to easy monetary conditions anytime soon. It is now almost certain that the Fed will hike interest rates by another 75 basis points next week, thereby forcing the economy to slow down further. All major asset classes continue to hemorrhage, with bonds, equities, cryptos and real estate all combining for a negative wealth effect this year.

So where do we go from here? Traders are torn between a supportive US supply situation and a weak global demand picture. Although the US crop was revised higher by the USDA, field reports are not encouraging, as parts of the Midsouth and Southeast have received too much rain in recent weeks and are dealing with problems such as boll rot and boll lock, which have taken another bite out of the US crop’s potential.

Barring any tropical systems heading into cotton areas, the weather forecast calls for warmer and drier conditions across the cotton belt over the next two weeks, which would help in getting the crops ready for harvest. Statistically the US balance sheet looks tight, but if the global demand situation doesn’t improve, it won’t be enough to move prices higher.

At the same time we caution against shorting NY futures, since it won’t take much to ignite another rally, as there is plenty of fuel in the form of mill fixations and sidelined speculators to get things going again.

NY futures were basically unchanged this week, as December gave up just 55 points to close at 103.29 cents.

Despite a 649-point trading range and a slew of new data, the December contract settled little changed from a week ago. Trading volume was light, averaging just over 20k, while open interest dropped about 1.5k to 209.7k contracts.

The much anticipated WASDE report came in on the bearish side, showing a bigger US crop, almost equal global production and mill use, and higher US and global ending stocks.

US planted acreage rose from 12.48 million to 13.79 million acres, while harvested acreage increased from 7.13 to 7.88 million acres. Yield was three pounds lighter at 843 pounds, which resulted in a crop of 13.83 million bales, or 1.26 million bales more than a month ago. US exports increased by 0.6 million bales to 12.6 million, which gave us higher US ending stocks of 2.7 million bales, up 0.9 million from last month.

While the US crop estimate was too low last month, we believe that the USDA is now overshooting the target. A number in the low 13s is more realistic in our opinion, given the recent setbacks in the Midsouth and Southeast, where excessive rain has caused boll rot.

Global numbers showed production at 118.45 million bales (+1.44 million) and mill use at a nearly identical 118.63 million bales (-0.46 million), resulting in a jump in ending stocks of around two million bales to 84.75 million bales. Even though the USDA has finally started to address its mill use number, it remains overstated in our opinion. Mills are still sitting on yarn and cotton inventory and are running significantly below their normal pace. We therefore expect to see additional cuts to global mill use as the evidence of slower consumption mounts.

When we look at ROW (rest of the world) numbers, there is a projected ROW production surplus of 9.32 million bales, which is supposed to be absorbed by Chinese imports of 9.0 million bales. However, not only do we believe that the ROW production surplus is going to be bigger, but we also feel that Chinese imports won’t reach nine million bales. Last season they amounted to 7.84 million bales and China is currently buying at a much slower pace. With Chinese prices still about ten cents below US prices, it doesn’t make sense for China to import that much cotton from the ROW.

After a hiatus of four weeks, we finally got some US export sales data this morning. Net sales of Upland and Pima cotton totaled 604k running bales for the current marketing year and 220k RB for the next marketing year. Shipments amounted to 963k RB for the four-week period. Considering that we are in between seasons and that new crop is facing some challenges, these numbers were quite supportive!

Total commitments for the current season are now at 8.3 million statistical bales, of which 1.45 million bales have so far been exported. These numbers compare to 6.65 million bales in sales and 1.25 million bales shipped a year ago. Assuming that exports will amount to 12.6 million statistical bales for the season as estimated by the USDA, weekly shipments will have to average only about 240k statistical bales, which seems very doable.

The CFTC on-call report still showed 9.12 million in unfixed sales for the December to July contracts, of which 5.37 are on December alone. These numbers are not quite as dramatic as a year ago, when 14.64 million were open for the same period. However, we are dealing with a crop that is about four million bales smaller, so the impact of these unfixed sales could still be significant and it is one of the main reasons why we would avoid shorting the NY futures market if possible.

The US Consumer Price Index (CPI), which came in at a higher than expected at 8.3% annualized, rattled financial markets on Tuesday, as it became clear that the Fed would not be able to easy monetary conditions anytime soon. It is now almost certain that the Fed will hike interest rates by another 75 basis points next week, thereby forcing the economy to slow down further. All major asset classes continue to hemorrhage, with bonds, equities, cryptos and real estate all combining for a negative wealth effect this year.

So where do we go from here? Traders are torn between a supportive US supply situation and a weak global demand picture. Although the US crop was revised higher by the USDA, field reports are not encouraging, as parts of the Midsouth and Southeast have received too much rain in recent weeks and are dealing with problems such as boll rot and boll lock, which have taken another bite out of the US crop’s potential.

Barring any tropical systems heading into cotton areas, the weather forecast calls for warmer and drier conditions across the cotton belt over the next two weeks, which would help in getting the crops ready for harvest. Statistically the US balance sheet looks tight, but if the global demand situation doesn’t improve, it won’t be enough to move prices higher.

At the same time we caution against shorting NY futures, since it won’t take much to ignite another rally, as there is plenty of fuel in the form of mill fixations and sidelined speculators to get things going again.

NY futures were basically unchanged this week, as December gave up just 55 points to close at 103.29 cents.

Despite a 649-point trading range and a slew of new data, the December contract settled little changed from a week ago. Trading volume was light, averaging just over 20k, while open interest dropped about 1.5k to 209.7k contracts.

The much anticipated WASDE report came in on the bearish side, showing a bigger US crop, almost equal global production and mill use, and higher US and global ending stocks.

US planted acreage rose from 12.48 million to 13.79 million acres, while harvested acreage increased from 7.13 to 7.88 million acres. Yield was three pounds lighter at 843 pounds, which resulted in a crop of 13.83 million bales, or 1.26 million bales more than a month ago. US exports increased by 0.6 million bales to 12.6 million, which gave us higher US ending stocks of 2.7 million bales, up 0.9 million from last month.

While the US crop estimate was too low last month, we believe that the USDA is now overshooting the target. A number in the low 13s is more realistic in our opinion, given the recent setbacks in the Midsouth and Southeast, where excessive rain has caused boll rot.

Global numbers showed production at 118.45 million bales (+1.44 million) and mill use at a nearly identical 118.63 million bales (-0.46 million), resulting in a jump in ending stocks of around two million bales to 84.75 million bales. Even though the USDA has finally started to address its mill use number, it remains overstated in our opinion. Mills are still sitting on yarn and cotton inventory and are running significantly below their normal pace. We therefore expect to see additional cuts to global mill use as the evidence of slower consumption mounts.

When we look at ROW (rest of the world) numbers, there is a projected ROW production surplus of 9.32 million bales, which is supposed to be absorbed by Chinese imports of 9.0 million bales. However, not only do we believe that the ROW production surplus is going to be bigger, but we also feel that Chinese imports won’t reach nine million bales. Last season they amounted to 7.84 million bales and China is currently buying at a much slower pace. With Chinese prices still about ten cents below US prices, it doesn’t make sense for China to import that much cotton from the ROW.

After a hiatus of four weeks, we finally got some US export sales data this morning. Net sales of Upland and Pima cotton totaled 604k running bales for the current marketing year and 220k RB for the next marketing year. Shipments amounted to 963k RB for the four-week period. Considering that we are in between seasons and that new crop is facing some challenges, these numbers were quite supportive!

Total commitments for the current season are now at 8.3 million statistical bales, of which 1.45 million bales have so far been exported. These numbers compare to 6.65 million bales in sales and 1.25 million bales shipped a year ago. Assuming that exports will amount to 12.6 million statistical bales for the season as estimated by the USDA, weekly shipments will have to average only about 240k statistical bales, which seems very doable.

The CFTC on-call report still showed 9.12 million in unfixed sales for the December to July contracts, of which 5.37 are on December alone. These numbers are not quite as dramatic as a year ago, when 14.64 million were open for the same period. However, we are dealing with a crop that is about four million bales smaller, so the impact of these unfixed sales could still be significant and it is one of the main reasons why we would avoid shorting the NY futures market if possible.

The US Consumer Price Index (CPI), which came in at a higher than expected at 8.3% annualized, rattled financial markets on Tuesday, as it became clear that the Fed would not be able to easy monetary conditions anytime soon. It is now almost certain that the Fed will hike interest rates by another 75 basis points next week, thereby forcing the economy to slow down further. All major asset classes continue to hemorrhage, with bonds, equities, cryptos and real estate all combining for a negative wealth effect this year.

So where do we go from here? Traders are torn between a supportive US supply situation and a weak global demand picture. Although the US crop was revised higher by the USDA, field reports are not encouraging, as parts of the Midsouth and Southeast have received too much rain in recent weeks and are dealing with problems such as boll rot and boll lock, which have taken another bite out of the US crop’s potential.

Barring any tropical systems heading into cotton areas, the weather forecast calls for warmer and drier conditions across the cotton belt over the next two weeks, which would help in getting the crops ready for harvest. Statistically the US balance sheet looks tight, but if the global demand situation doesn’t improve, it won’t be enough to move prices higher.

At the same time we caution against shorting NY futures, since it won’t take much to ignite another rally, as there is plenty of fuel in the form of mill fixations and sidelined speculators to get things going again.