Wow tjc! Thanks for sharing. 

That hurts. To call it correctly but miss by 1 day.........ouch.

Adding insult to the injury, your Chicago Bears had a tough loss to the Patriots yesterday. 

Do you think they held the price down on Friday so that all those call  options would expire worthless?

You've been trading for long enough and well enough to shrug it off and I know that you see things objectivity and look at the big picture, while staying humble but still confident. 

Many traders like to share the news of their profitable trades and let the losses pass without mention. Appreciate your honesty/integrity as well as sharing your analysis/trades.

Previous cotton discussion:

https://www.marketforum.com/forum/topic/15065/

Historical perspective on cotton going back to different time frames.

Cotton up over 2c at the moment.

3 month-major top in June but the lows are in.

 1 year below                

5 year below

10 year below

  Cycle wise,  was anticipating a High on Wednesday above 80, whereat I was going to liquidate.  No real rally, and gradual decline.

  Next 21 day cycle low was to have been today.

  THE weekly cycle low will soon be confirmed, so the analysis is/was correct---the timing, however, got me.

USDA crop report:

https://release.nass.usda.gov/reports/prog4318.txt

Cotton deteriorated slightly. Nationally,. the VP was +2%(mainly from panhandle area freeze/wet weather) but the Excellent was also +2%(also mainly in TX which saw +4% in the excellent category).

Poor stayed the same, fair was -1% and good was -3%. 

The Georgia crop actually improved. 5% came out of the P/VP category and moved up to Fair.  After assessing the damage, apparently it wasn't quite as catastrophic but improving from 54% P/VP to  49% P/VP  is still catastrophic on any scale.

One can guess that much of today's huge rally, up 2c and closing around 80c and also the highest price since Sept 18th, when we had a downside breakout (after trading sideways from mid August to mid Sept) was tied to these deteriorated conditions.......maybe expectations for worse???

What do you think Larry/tjc or others?

The USDA will make a massive production cut on the November crop report. 

Mike said: 

"One can guess that much of today's huge rally, up 2c and closing around 80c and also the highest price since Sept 18th, when we had a downside breakout (after trading sideways from mid August to mid Sept) was tied to these deteriorated conditions.......maybe expectations for worse???

What do you think Larry/tjc or others?

The USDA will make a massive production cut on the November crop report. "

-------------------------------------------------------------------------------

Mike,

 I agree about the USDA. Looking back at the history of weekly crop condition reports: when there's a major worsening of a state's crop from a hurricane, sometimes it will improve some the following week like it did in GA although it doesn't normally get back to near where it was prior. Regardless, as you said, it still is much worse than 2 weeks ago. I still think a 1 MB or so loss from the earlier estimated 2.9 MB GA crop, alone, quite possibly occurred. Also, as was noted, TX (along with OK and KS) worsened some and more of that could come next week with the Tue-Wed rain coming. So, the overall net US change today was a tad worse despite the 5% GA improvement.

 I like to go here to look at the weekly state comments to give me a bit more insight behind the numbers:

 https://www.nass.usda.gov/Publications/State_Crop_Progress_and_Condition/

 I'm still waiting for GA/AL/FL/OK/KS. They should be out by tomorrow. But TX is out:

 "Cotton conditions in the High Plains were declining. Producers across the state were waiting for drier conditions to begin harvest."

 To sum up my feelings,  I'll restate some of what I said in the other thread yesterday as none of that has changed. I counted 5 times over the last 45 years (1 in 9 years) that the USDA has reduced the TX/OK crop 3% or more in the Nov report vs the Oct report due to a wet Oct there. IF they were to reduce it by just 3%, that would be ~225K bales. 

 The largest aggregate US % drop on record from the Oct to Nov reports since 1964 is 6% (set in 1974), followed by 5% (1969), and 4% (2009, 1993, 1976, 1966). So, a 4%+ drop in the Nov report has occurred ~1 every 10 years. I will be very surprised if there isn’t another 4%+ drop in the Nov of 2018 report. Even a record tieing 6% drop wouldn’t surprise me IF GA/AL/TX/OK/FL/NC/KS/AZ are given the losses I think they have had and IF the Delta/others are not given any significant gains (I’m not predicting those though the Delta looked pretty steady today). I wouldn’t even bet the ranch against a new record high US Nov report % drop though I’m not predicting that right now.

 I don't normally make market recommendations and won't now. However, I do feel that today's 2 cent rise was clearly due to a US crop getting much smaller than it was as of 10/1 in combination with prices Fri being only 2.5 cents above the autumn low despite the major crop reductions that are coming. I think today's gain was sort of looking ahead to a good chance for a big drop in the Nov USDA report.

  The GA & AL weekly county comments are now out.

 Here are some from GA:

1. “The cotton harvest was underway. Yields were definitely reduced by the hurricane, but we are still uncertain of the total effect.

Brent Allen, Washington County”

 Washington County is in east central GA & over 200 miles NE of the worst hit part of SW GA. Michael was only a TS by then though highest winds were still  a respectable ~55 mph there with the center very close. My research has shown that 40-50 mph can easily cause 25-30% losses of open CT.  Yields being “definitely reduced” sounds like rather substantial damage. So, after putting this all together, I’m going to roughly guess 25% losses there.

2. “Damage from Hurricane Michael was still being assessed, but early estimates were that we lost half of the cotton and pecan crops in Pulaski County. Cotton plants were intertwined from the high winds, making the remaining cotton difficult to harvest.

Jay Porter, Pulaski County”

 Pulaski County is further SW in central GA ~125 miles NE of the worst hit GA area of extreme SW GA. Michael was still a 70 mph TS as the center went just NW of Pulaski County. I’m roughly guessing highest winds in Pulaski County were then ~60 mph, which can easily take 50% of opened CT. So, those early estimates of 50% losses sound reasonable.

3. “Hurricane Michael blew excessive amounts of cotton from plants. Some soybean fields were blown to the ground. The hurricane did some damage to dug peanuts, and rain on Monday further delayed peanut digging. Pecan groves suffered extensive damage such that growers cannot harvest their crop at this time. Costly and time-consuming work will be required to clear downed trees and limbs before the crop can be harvested.

Doug Collins, Lee County”

 Lee County is even further SW and is in SW GA ~75 miles NE of the worst hit far SW GA. The center went over the NW part of Lee County, when highest winds were 80 mph. Albany, which is only a few miles south, earlier recorded 74 mph winds further from the center. So, I can believe highest winds in Lee County were in the 75-80 mph range, which is capable of taking 75%++ of Open CT. I don’t know what “excessive” losses are but I’d feel pretty safe in assuming a conservative 2/3 loss in Lee County. Keep in mind that losses in Pulaski, which is 50 miles NE and where winds were a good bit weaker, are actually estimated at 50%. 

4. “Hurricane Michael was a terrible weather event. Over half of the county’s poultry houses were destroyed. Most of the cotton and pecan crops were destroyed.

E. Lanier Jordan, Baker County”

  Baker County is further SW than Lee County and is in SW GA only about 35 miles NE of the very worst hit far SW GA. The center traveled near NW Baker County when highest winds were ~95 mph. So, I can believe that Baker County got 80-95 mph winds. That can easily take 90%+ of Open cotton but I’ll conservatively guess 80%, which would fall into the “most being destroyed” category.

5. Further SW in the far SW corner of GA (Seminole & Colquitt County & nearby, losses were reported as 90%-100%. Then, Michael‘s top winds were first ~120 and then weakened to -100 mph. It was then like a very wide EF-2 to EF-1 tornado. No open CT could withstand anything like that. So, I can believe that virtually nothing wasn’t blown off.

——————-

What is the purpose of this analysis? To give a good feel for what the losses were/whether or not the GA losses, alone, could be 1 MB. The answer, which is assuming a conservative 20% already harvested, is clearly yes and even that is probably a bit conservative. I doubt the market is assuming losses this big as no previous hurricane of the last 50++ years has done anything like this, but this was no ordinary hurricane and it seems to be starting to sniff bigger and bigger losses in GA as well as AL/FL in addition to way above normal October rain related losses in TX/OK/KS/AZ.

GA County map: https://geology.com/county-map/georgia.shtml

Thanks very, very much Larry,

Such a detailed/comprehensive analysis is probably not available anywhere without a substantial fee. 

The market, being down sharply today is possibly, as I speculated yesterday, disappointed with the crop condition not deteriorating much more from the previous week.  I was surprised the rating was not down more. 

80c is also a tough number to crack, especially since it represents the support area(just above that) of the downside price break out over a month ago. 

Also, 80c cotton is not cheap in this globally traded commodity.

It's near the top of prices over the last 5 years. Regardless, with indisputable huge losses coming on the next USDA crop production report in November, its also hard to imagine cotton prices selling off too far.

 You're welcome and thanks, Mike. I love doing analyses like that. I'm quite nerdy that way.

 I don't disagree with anything you said as possible significant factors in the mix. However, I would add that I think today's steep US stock market drop (and crude to a lesser extent) are likely bearish factors today that should also be figured in the mix.

Agree!

Wasn't thinking about that earlier............."2 heads are better than 1!"

CT is down again today due to further drops in the world stock markets. Regardless of crop losses, it will likely continue to struggle while stocks are dropping. The wet wx this morning in W TX CT areas was already expected/well forecasted.

Worldwide stock markets are mainly up and the US are very strong. CT, which was sharply down early on another week of weak export sales, has since gone positive. Is this a coincidence? I don’t think so.

my first really bad trade that hurt really ,really bad was cotton. I was long for a few weeks,doing very well,took a two hour ride to Cape May at the beach,logged on,I lost it all and some in one after noon! It was during a July drought.

WX

Totally agree with your comments--outside factors established the (next) daily low today, 3 weeks after THE low.

Were I not so mentally beaten up, I would be long.

BUY dip--you now know were to place stop (sub 76)

OH, what could have been

 Sorry to hear tjc although I and probably most of us know the feeling.

 So, thanks mainly to the roaring stock market, today CT came back and closed up despite weak export sales reported earlier. Interestingly, today's front month (Dec) closed up 0.61, but the very next month (Mar), closed up only .09! Any opinions as to why? I looked back through all of October and couldn't find anything like it on any other trading day. Furthermore, whereas Dec volume (22K) was heavy but nowhere near a record, Mar volume (13K) was at a new record. I'm wondering if this suggests many were buying a Dec-Mar spread. If so, why?

  Spread chart shows lowest close yesterday, so I would assume the difference was too large and is correcting.

  Implies cotton has bottomed?  Front month will now lead?

tjc,

 We’ll see. There’s an enormous amount of losses in the US crop that will need to be dialed in. The amount that has already been dialed in is highly questionable and very likely is nowhere near what some indicators are suggesting it may turn out to be. It would be higher right now had export sales and stock markets not been so weak this month.

 Note that in the face of sharply lower US stock markets, CT held its own near unchanged earlier. The Dow was down over 500! Subsequently, when the stock markets started to erase much of these losses, CT rose substantially an with the Dow now down only 215 or so, CT is now over 200 points higher than where it was about 28 hours ago just after the weak weekly export sales report was released.

 Helping CT today may be NW TX rains on model consensus for next week that were previously not showing up to the extent shown now. The rains are still not showing as heavy but just having any is probably a bullish factor considering the Oct harvest struggles there.