Today’s scattergram shows that a US end stocks ratio of 35.5% and a price of 74c is near the upper end of a large cluster of data points. There is one outlier data point of 85c and 36%, but there are nearly 3 dozen others that suggest an average price would be close to 63c. Ignoring some earlier years, one could say that a 35% ratio is most likely to make a price box of 63c to 80c. Hence our price box of 63c/83c may be 3c too high on the upper end. But given the vagaries of this market, we think we’ve done pretty well with getting it mostly right for this year.
As for the reports, the US export of 11.8 Mb will likely come closer to our own 12.0 Mb in the next couple months. The production of 17.3 Mb vs our figure of 17.6 Mb was nearly all due to a larger cut in Texas yield than we anticipated. And this was nearly all due to poor yields on the Llano Estacado, which is too close to Oklahoma’s terrible yield of 411 #/a to escape a similar fate. Our guess is that dryland yields in OK will tell us about where dryland yields will be for west Texas.
World numbers were benign, except for a ½ Mb increase for India’s exports. That basically was the reason end stocks dropped by 600kb.
We have been timidly neutral/bullish recently, and will turn neutral/bearish if Mar can climb another 2c. At 77c, farmers should be eager to unload some cotton, more so to get out of paying carry than outright comfort with the price. In any set of normal circumstances, we almost no chance for spot futures to reach above 80c the rest of the market year. Specs can try a short near 77c too.