Were US cotton exports really as bad as many investors thought?
Cotton futures tumbled by 2.0% in the last session to a two-month closing low of 62.26 a pound (and lost a further 0.4% in early deals on Friday to hit 62.03 cents a pound) in a slide attributed largely to data showing negative US export sales in the week to July 30.
That is, cancellations by importers in the likes of Hong Kong, Pakistan and Turkey of orders of US upland cotton for 2014-15 more than exceeded new sales, leaving the US swallowing a net reduction of 14,200 running bales.
The figure "confirmed a picture of weak demand", said Tobin Gorey at Commonwealth Bank of Australia.
At broker MCM in Texas, Jobe Moss told Reuters that "I wasn't expecting a negative, and I don't think the market was either".
Louis Rose at the US-based Rose Report said that, after the data, December cotton futures "gapped lower and never recovered, losing 1.25 cents a pound" after the statistics were posted.
Still, from his perspective, the data appeared "seasonally strong, especially export shipments".
Data on actual US exports for the week came in at 186,600 running bales for upland cotton, with a further 9,800 running bales for high quality pima cotton.
That meant that with 1 day to go in 2014-15, the US had comfortably exceeded the combined cotton exports of 10.68 running bales that the USDA had forecast for the marketing year.
Total shipments, according to the USDA, were 11.42m running bales as of July 30.
Meanwhile, forward sales of upland cotton for 2015-16, as began on Saturday, came in at 123,934 running bales, up 78% week on week, with a further 4,200 running bales of pima.
"Demand for US new crop for export increased significantly," Mr Rose said, although acknowledging that the pace was behind that needed to meet the USDA forecast for the new season.
And, as an extra support for values, he noted market estimated that farmers in Texas, the top US cotton-producing state, planted 300,000 acres fewer with cotton than the 4.9m acres that the US Department of Agriculture has estimated.
Still, bears also have some other cards to play.
Mr Rose highlighted that "very beneficial rains" had blessed crops in the mid-southern states and portions of the south eastern, rainfall which was "expected to continue before very hot temperatures return over the weekend".
And from a chart perspective, Thursday's price fall boosted the case for technical weakness in cotton futures.
"Longer-term downward momentum quickened on Thursday as major chart support was breached," he said.
Mr Gorey said that "as important" in pressuring prices as the export data was that futures fell convincingly below 64 cents a pound.
"The support that had repeatedly emerged when prices traded the half-cent range below 64 cents seems to have dried up.
"The market finally found some support at lows just above 62 cents a pound, last seen in mid-May."
In fact, in early deals on Friday, futures bottomed at 62.00 cents a pound.
Will the level survive a further attack, whatever the export data say?
By Mike Verdin