Supply and stocks

What this is The USDA world cotton balance sheet for the current marketing year, in million bales: production, consumption and ending stocks by region, beside the same stocks figure from last month’s report.

How to read it One row per country, all in million bales: what it grows (production), what its mills spin (mill use), what it buys and sells abroad, and what will be left in the warehouse when the season ends (ending stocks). The last column divides ending stocks by mill use, so 50% means half a year of spinning is sitting in stock; the bold World row is the total that matters most. On a phone the table slides sideways.

What moves it Monthly revisions as USDA updates crop estimates and demand. A change to the Chinese or Indian line moves the world total more than anything else does.

How to use it Whether cotton is tight, and which way it is heading. The stocks to use column is ending stocks divided by mill use: the lower it goes, the less spare cotton stands behind each month of spinning, and a fall repeated over several reports is the condition under which sellers start defending their price.

The trap It is an estimate that gets revised, sometimes heavily, and the ending stock for a year still in progress is a forecast rather than a count. The last report column shows one step of the trend; treat several months in the same direction as the signal, not one.

What this is The share of the US cotton crop rated poor or very poor by USDA, drought coverage across Texas, and recent heat and rainfall from NASA satellite data.

How to read it The headline is the share of the Texas crop in the two WORST condition grades, so a bigger number means a worse crop. The drought bars below show how much of Texas is dry: each bar already includes the bars beneath it, running from mildly dry at the top to exceptional drought at the bottom, which is why they shrink as you read down. In the weather table each row is one growing area, with its total rain over the last month and the count of days that went over 40 degrees.

What moves it Weather, and nothing else. Texas is the largest US growing state, so its condition moves the national number on its own.

How to use it An early warning on the coming crop, weeks before it reaches a balance sheet or a price. A crop deteriorating through the growing season is the classic setup for a tighter market.

The trap A poor rating early in the season often recovers, and condition is a survey of opinion rather than a measurement. A worsening crop is drawn in red here because it is bad news for a buyer, even though someone holding cotton would read the same figure as good news.

What this is How many cotton futures contracts the managed money funds hold net long, and how much unfixed on-call selling is outstanding, both from the US Commodity Futures Trading Commission.

How to read it Long is a bet that the price will RISE, short is a bet that it will FALL, and net long is simply the rising bets minus the falling bets. So when the chart's line is above zero the funds as a group are betting on dearer cotton, below zero on cheaper, and the further it sits from zero the more crowded that bet is. Each table row counts open bets in contracts, and one contract is 50,000 pounds of cotton. In the lower table, still to fix means cotton already sold or bought whose price was deliberately left open, so that buying has yet to reach the market.

What moves it Fund positioning follows the trend and the crop story. On-call sales build up when mills buy cotton on price to be fixed later and then keep delaying the fixing.

How to use it It shows how crowded the current view already is. A very large net long has far more holders to disappoint than a small one, and a large unfixed on-call figure is mill buying that still has to reach the market.

The trap This is not a forecast, and an extreme position can stay extreme for months. The report is also published several days in arrears, so it describes last week rather than today.