Well a lot has transpired since my post just last week! We saw limit up on Tuesday (likely from the combo of Irma and the news out of China which I mentioned in last week’s post here) we then began to breakdown a bit after that sling shot. Then on Friday by golly we hit contract highs for Dec at 75.75!! That did not hold though and we did not close on the high.
Irma was set to hit over the weekend and the path shifted more West towards Alabama, as it was initially set to be an almost direct hit on the whole state of Georgia. Being that the storm weakened any many felt the excellent Georgia crop was being spared we broke down further. We touched limit down overnight leading into Monday and had losses throughout the day session.
Then Tuesday. Lord Jesus. Say huh? Slow your roll! Calm Down! Those are all the words (along with a few others) that were said when the report came out at 12pm EST. USDA increased acreage to 12.62 from 12.06, increased yield from 892 to 908, and pretty much left abandonment flat with a .4% increase. This increased production from 20.55M bales to 21.76M bales, so 1.21M more bales. Shut the front door, that’s a lot of cotton!
FSA released their certified acreage data in August, which indicated there were about 300k more acres of cotton than expected. So, we knew a portion of the bump was coming, we didn’t know they would plop down 560k more acres though and increase yield again. That bearish surprise I mentioned last week!
However; there was a note that stated that Harvey and Irma losses/damage was not fully reflected on this report and told us to pretty much “stay tuned” for October’s report for that. I do hear the Harvey losses are increasing by the latest report I saw. Damage to GA and AL is still TBD. There was some dramatic damage and losses especially on open cotton in SW GA and SE AL. Then there was minor to heavy damage reported statewide in GA. Some areas hit harder than others. Please continue to keep all those affected in your thoughts and prayers. *There were losses in SC as well I hear, but I haven’t got any solid information from that area yet.
So what does all this mean? Well we are currently hovering at .6850 as I write this. I know many feel this is a kick in the pants after enduring the hurricanes. Damage on crops, then limit down. Don’t turn out the lights on cotton just yet though. Ole girl has some fight left in her! We will begin to see the real impact on the SE crop and adjustments for that as well as adjustments for Harvey in Texas and the Delta. Also, demand remains strong. Current supplies are mighty tight and we have booked approx 7M bales for 17/18 crop already which is 3M ahead of pace from last year. Finally – Who on God’s green earth knows what will come of the ban on reserves in China? Hold on tight and pay attention, now is not the time to look away from this market! Drama at DEF CON level 3.
Questions or comments on cotton? Please feel free to email Ashley@agriauthority.com.