Varner Brothers: Cotton Daily


Big Miss

Varner Brothers
Thought Of The Day                             
“I’m the best juice harp player in Mississippi, and that means I’m best in the whole world.”  Sonny Boy Williamson

No less than 4 sources were quoted in wire services, saying the US production would be cut by 3/4 Mb.  This was a widely accepted “fact,” one that supported upward price gains in the last 2 weeks.  These pages opined a push, and one savvy analyst who does good work suggested at most a cut of 200 kb.  A cut of 3/4 Mb would have resulted in higher prices, but no cigar.  A cut of similar size did arrive in world numbers, from several different countries.  Call it all a slight tilt to the friendly side, but given that Mar was trading 65c on the last report, the Jan report is not worth a 6c gain.  Not even close.

Regards the numbers, there is much to ponder, one being the tit-for-tat shift between abandonment and yield.  This is to be expected as the USDA finally gets acreage right, then settles on yield after some hard production numbers are out.  Now that the US is dead center 20 Mb, +/-, next moving target will be exports.

Sales were on the poor side of mediocre at 157 krb, with Viet high at 97.  Shipments were ok at 215 krb, but this number needs to grow soon. 

Varner View

Due to consensus expectations of a much lower US production, and a rather poor sales/export report, overall bias for today is a solid negative.  And given that cotton is up $70/b in 4.5 months, one has to wonder where this bull will get its next meal.  Also, Dec 20 has pushed into the lower edge of where Dec 19 traded last winter, casting doubt that the acreage decline will reach 12%.  We have been negative with Mar near 70c, and after today’s reports, we are more so.


Correlation between cotton and the SP is extraordinarily high, since both made lows on 26 Aug, within a few hours.  A correction on 12/03 was matched tick for tick, with both markets again bottoming 3 hours apart.  One chart looks so much like the other, they could be swapped.  Is it possible for a few large cotton traders to be leading and manipulating the SP?  Chart shows the daily SP, and one can match it with that of CTH since both markets made late Aug lows.