Bulls

• Lubbock-area cotton reached 103°, 104°, 105°, and 102° Friday, Saturday, Sunday, and Monday, the hottest so far this year, effectively shutting down plant development over the weekend.  The region has also been rain-free for two weeks.  As a result, 72.52% of Texas is abnormally dry or in drought, the highest share in nearly a year.  What's more, cotton areas across W Texas are likely to remain mostly dry over the next week, crimping yield prospect  

• With the Aussie planting season only a few weeks away, drought continues over key cotton areas and regional irrigation supplies are reported to be very low, curbing planting intentions

• In ~5% of the Indian state of Maharashtra pink bollworm infestation on cotton has crossed the “economic threshold limit”, when the value of the damaged crop exceeds the cost of controlling the pest, suggesting a limited harvest;

• US cotton exports jumped last week to ~367k bales, the biggest mid-August volume on record, primarily owing to robust shipments to Vietnam, also the biggest mid-August volume on record to this destination.  As a result, early marketing YTD cumulative exports are off to their biggest start since 2008/09, boding well for big exports in 2019/20;

• Cert stocks were flat or lower Thursday for the 41st straight weekday, sliding to their lowest in eleven months...a modest bull.

Bears

• Mostly favorable weather for developing US cotton is likely over the next week across the Mid-South and Southeast;
• The Pakistani cotton crop reportedly is developing well;
• Rainfall was scattered but averaged 10% heavier than normal nationwide for India over the last week, keeping season-to-date monsoonal rains 2% wetter than normal, favoring the developing crop although replanting may be needed in a few areas due to flooding;
• Chinese ZCE nearby cotton futures sagged Friday to their lowest settle since May 2016;
• US weekly net cotton sales sank to their lowest mid-August volume in four years last week, primarily owing to another week of cancellations by China;
• Owing to looming US tariff hikes, July Chinese yarn output fell by 5.76% month-on-month and cloth production fell by 3.35%.  Among them, the output of cotton blended yarn and cotton blended fabrics decreased -8.65% and -1.58%, respectively;
• Chinese yarn prices are plumbing lows this week not seen in a few years, owing to high stocks and production cuts due to the looming tariff hikes.  The average spot price of 32s domestic cotton carded yarns slipped to 20,545 yuan/ton this week, down 147 yuan/ton from the previous week.  Imported 32s carded cotton yarn from India and Vietnam also retreated in sympathy, with all three gauges edging this week to their lowest in a few years;
• Chinese imports of US goods fell 19% in July from a year earlier, following June's 31.4% plunge.  Exports to the US fell 6.5%.  I'm waiting to see July import data;
• As expected, Friday China announced retaliatory tariffs on some US goods beginning as early as Sept. 1st, weighing on equities and commodities...this week's major bear;
• The spread between the yield on the 10-year Treasury  note and that of the 2-year note turned negative--barely--again Thursday, hinting at an eventual recession;
• In response, Morgan Stanley warned this week that the risk of a global recession is “high and rising” and "risks remain decidedly skewed to the downside,” as trade headwinds aggravate economic slowdowns;
• US Manufacturing PMI dropped to a ten-year low of 49.9 in August, below market expectations of 50.5 and indicative of a contraction in the manufacturing sector;
• The U. of Michigan gauge of consumer sentiment declined last Friday to its lowest level since January.

Other Notables

• The National Hurricane Center says a low-pressure system just off SE Florida has a 70% chance of formation over the next five days.  Other than that, the Atlantic Basin remains relatively quiet as hurricane season nears its typical September peak;
• China's currency slipped to its lowest level in over a decade Thursday, dropping 0.2% to 7.0749 to the dollar.  A lower yuan typically makes dollar-denominated US cotton more expensive in China, but typically makes Chinese textile & apparel exports less expensive;
• Wednesday afternoon the Federal Reserve released minutes of its July 30-31 meeting, where FOMC policymakers voted to cut interest rates for the first time in more than a decade.  "Participants generally saw uncertainty surrounding trade policy and concerns about global growth as continuing to weigh on business confidence and firms' capital expenditure plans," according to the minutes.  More directly, despite data showing that the economy is growing at a respectable pace above 2%, the Fed cited concerns that a slowdown in foreign countries could spill over to the domestic economy, especially if Trump raised the stakes in his trade dispute with China--which he did a few days later.  Two FOMC participants voted not to cut rates, while others thought the 0.25% cut was too small.  Traders expect the Fed to cut rates 2-3 more times this year, with a 90% probability of another 25 basis-point rate cut at the September meeting;
• Fed Chairman Jerome Powell is set to give a speech 10:00 ET Friday at the Jackson Hole Economic Symposium, an annual gathering of central bankers, and many will be listening closely for any hints of further interest-rate cuts;
• China's average price of viscose staple fiber this week was 11,283 yuan/ton, down 297 yuan/ton week-over-week, & polyester staple fiber was 7,203 yuan/ton, an increase of 47 yuan/ton from the previous week.  Both prices are near their lowest since 2016.