December futures last week made a nest at the 77 to 78 cent area. This is important. The pessimistic bottom of current expectations on this crop is about 75 cents. So, we’ve been able to avoid it for now even with the latest slide that began about a month ago and really broke sharply down May 22.

There seems to still be support at the 76 to 77 cent area. But the short-term trend appears to still be down. I’ll feel more optimistic if we can get back above 78 and stay there or trend higher.

Dec14 closed at 77.83 last Thursday. Friday prices were down slightly. There are still many factors including weather, exports, foreign production that can impact cotton prices; and even what’s now happening in Iraq can impact US and World economies, the stock market and all commodity prices. I’m a little concerned that the short-term trend is down but hopefully support will hold. Rallies above 78 to 79 and certainly 80 would be pricing opportunity depending on how much risk you are willing to take and how much expected crop you already have committed.

The latest crop production and supply/demand estimates were released last week. The projected 2014 US crop is 15 million bales—up ½ million bales from the May estimate based on improved rainfall in Texas and thus less acreage abandonment. The July report will be the first based on the June 30 estimate of actual acreage planted.

World production was increased to close to 116 million bales as the result of the increase in the US estimate—this compares to 118 million bales last season. Just over 1 million bales were added to beginning stocks (previous crop inventory we will carry in to the 2014 crop year on August 1). As a result, stocks projected at the end of the 2014 crop year were raised just over 1 million bales.

Projected world cotton use (or demand) for 2014-15 was raised 460,000 bales to 112. 3 million bales compared to 109.8 million for 2013-14. This is an increase of 2.25 percent and an encouraging sign; but production will still outpace Use 3.6 million bales for 2014-15 despite production projected to be down by over 2 million bales.

The June report lowered projected Chinese imports for the 2014 crop year by ½ million bales to 8 million bales. Production this season is expected to be down and use expected to be up 1.5 million bales. China is expected to import much less cotton compared to this season and the previous 2 seasons (2011 and 2012) when building massive stocks.

All eyes will be on the Chinese crop (how much less will it be), imports (the trend in US export sales to China), and China’s policies impacting the use of their stocks.