It is therefore not surprising that there were at least three different takers ready to receive 260’000 bales of certified cotton, most of which has since been de-certified. As of this morning, the remaining certified stock amounted to less than 60’000 bales, with about 4’000 bales awaiting review.

By contrast, with the spot futures contract now trading at over 83 cents, which equates to a landed Far East price in the mid-90s for high grades, US cotton is currently no longer able to compete against Indian or West African styles in the mid-to-high 80s. The US has done what it needed to do, namely price itself out of the market, after it had sold nearly 2.5 million statistical bales over the last two months.

The US simply couldn’t keep on selling at this pace, since export sales have already reached around 7.1 million statistical bales, which combined with 3.6 million domestic requirements adds up to 10.7 million bales in total commitments. With the USDA still predicting a US crop of just 13.1 million bales, there are only 2.4 million statistical bales left for sale before the entire crop is committed and we start using up beginning stocks.

In other words, at 200’000 bales a week the balance of the crop would be sold by early March and at 100’000 bales a week it would take until early June. Needless to say that the US needed to step on the breaks and it has done so with this rally, as we expect sales to drop off significantly.

This week’s USDA supply/demand report contained only minor changes, as the USDA shuffled some numbers in India going back over three seasons and lowered Chinese production by another 500’000 bales. On the trade front there were some notable changes as the USDA increased Indian exports from 7.0 to 7.5 million bales at the expense of lower exports from Australia, Uzbekistan, and Turkmenistan, while Brazilian exports were cut by 300’000 bales due to slower than expected shipments.

However, the numbers that matter most in regards to international prices, the ROW production surplus in relation to Chinese imports, were basically unchanged as the USDA still predicts that Chinese imports of 11.0 million bales will neutralize the expected 11.15 million bales surplus in the rest of the world. In other words, we should have more or less the same amount of stocks to work with at the end of this season as we did last summer.

There was an interesting development on Capitol Hill that has the potential to impact the price of cotton over the coming years. A group of ten US Senators is sponsoring a bipartisan bill to eliminate the corn ethanol mandate, which if passed would likely lead to a reduction in corn consumption.