Cotton Experts announces that the following two weeks of anxious anticipation cotton traders were a bit stunned by the USDA August World Cotton Supply Demand Report released.
While USDA's estimates of foreign supply and demand were well expected, the estimated U.S. crop size was a real stunner.
While the industry had expected a significant drop in U.S. production from the July report, there was little change. Nevertheless, crop conditions continue to deteriorate weekly.
Cotton Experts was the first objective field survey of the crop this year and will be followed by monthly surveys through January. Yet, judging from New York's early reaction, the report was not a huge surprise to many traders.
However, I must be counted as one that was surprised. While I had no expectation that the survey would include an estimate of the pending, but not yet certified disaster in the Southwest, there was no doubt that United States Department of Agriculture (USDA) would lower its estimate from that of July.
The expanding drought in the Southwest and Midsouth will continue to take its toll. I continue to expect the U.S. crop to fall below 19.5 million bales, with the not so outlandish expectation that the crop will fall below 19 million bales, somewhat closer to 18.5 million bales.
The 57 cent area proved to hold far too much resistance to overcome for now. Nevertheless, that area will continue to be challenged.
marketing@alchempro.com
