Cotton Jumps Most in Three Years on Surprise U.S. Crop Estimate
This article by Megan Durisin for Bloomberg may be of interest to subscribers. Here is a section:
Yields will average 795 pounds an acre, down from 819 pounds projected in July, the USDA said. Inventories in the 12 months ending July 31 will be 3.1 million bales, down 26 percent from last month’s forecast and a two-year low.
The USDA cut its estimate for global reserves by 2.7 percent to 105.19 million bales from last month’s forecast.
The report “was quite the surprise,” Keith Brown, president of Keith Brown & Co. in Moultrie, Georgia, said in a telephone interview. “They cut the U.S. crop. The real clincher was lowering the global carryout by 3 million bales, because that had been ascending every month.”
Yesterday’s USDA report set off fireworks in the agricultural futures markets. Upgrades to expectations for corn and soy sent prices lower while the downgrade to cotton expectations have resulted in prices leaping higher. This is an El Nino year with extreme weather already recorded with probably more to come, suggesting volatility in agriculture prices is more likely than not.
Cotton had exhibited a rounding characteristic within its base formation until June but failed to surmount the 70¢ level and pulled back sharply to break the yearlong progression of higher reaction lows. Yesterday’s emphatic upside key day reversal indicates a low of at least near-term significant and a sustained move below 62¢ would now be required to question potential for additional higher to lateral ranging.
Corn has unwound its entire late June through early July rally and found at least near-term support yesterday in the region of 360¢. A sustained move below that level would be required to question potential for additional higher to lateral ranging.
Soybeans have returned to test the lower side of a yearlong range and also found at least near-term support yesterday. A sustained move below the low near 910¢ would be required to reaffirm supply dominance.
Arabic coffee rallied last week to break a four-month progression of lower rally highs. The chart pattern has medium-term Type-2 bottom formation characteristics and a sustained move below 130¢ would be required to question that view.
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