I think any rally will run out of steam at 55-58 cents and certainly near 60 cents. The US and world supply and stocks situation is still fundamentally bearish. The only way to work off stocks is through low price and improved off -take. USDA's September report will, in my opinion set the tone for price. To some extent, the August crop forecast of 18.3 million bales was surprisingly low enough to cause most market to give back 2-3 cents put the market appears not yet ready to commit fully.
Producers have a tough decision on marketing.
If producers contract at levels above the loan rate, they will then be forced to forgo the loan and POP the cotton. Basically, the decision boils down to taking 2-3 extra cents above the loan rate, should it present itself by contracting vs. the harvest POP compared to the potential loan gain or equity. I think it prudent to have a floor under the cotton in the form of a contract or be willing to take the loan plus gain or equity as the worst case scenario. The USDA September report, should it confirm a smaller crop, may well present the first real opportunity to lock in a price above the loan rate. Producers may wish to think about contracting, particularly if above the loan rate, any cotton you know you can make and deliver then take the POP and buy a Call Option.