Interviews
News Flash
NY futures collapsed
23 Jul '11
5 min read
In the grand scheme of things the amount of long positions that were caught in this downtrend is not that huge in absolute numbers, even with all the recent defaults and cancellations added back in. World stocks are still relatively small by historical norms and even at reduced global demand there will not be a lot of cotton left in October. Take the US for example, where stocks will just about run out by the time new crop starts coming in.
We estimate that the US will have about 3.0 million statistical bales left when the new marketing year starts on August 1, which is about the same amount we had a year ago. Against that export commitments will be in the neighborhood of 7.5 million statistical bales (including the carry-in from this season), which is a record. In addition to exports we also need to account for about 0.32 million bales of domestic mill use per month.
We figure that about 60% of next season's supply of around 18.5 million bales (3.0 beginning stocks + 15.5 million crop) is already spoken for. We therefore don't expect to see any price pressure from the US for months to come, at least not until this struggling crop is safely in and existing commitment have been applied.
The situation in the rest of the world looks a little more comfortable, but not by much. The reason why mills are not too worried about tight stocks this fall is that crops in the rest of the world promise to be quite a bit larger than in the previous two seasons, which should guarantee enough availability after we pass the bottleneck.
So where do we go from here? The physical market is finally becoming more active, although so far it has been mainly China who accounted for the recent buying interest. Nevertheless, after dropping about 120 cents in a matter of just four months, the market looks oversold and we expect prices to stabilize.
If mill buyers were to return in greater numbers, we could even see a bit of a rebound in the weeks to come. However, in order to rekindle any kind of a bull market, we either need a crop problem other than Texas or stronger than expected demand. In our opinion the most likely scenario at this point is a sideways trading range and a pronounced drop in volatility.
We estimate that the US will have about 3.0 million statistical bales left when the new marketing year starts on August 1, which is about the same amount we had a year ago. Against that export commitments will be in the neighborhood of 7.5 million statistical bales (including the carry-in from this season), which is a record. In addition to exports we also need to account for about 0.32 million bales of domestic mill use per month.
We figure that about 60% of next season's supply of around 18.5 million bales (3.0 beginning stocks + 15.5 million crop) is already spoken for. We therefore don't expect to see any price pressure from the US for months to come, at least not until this struggling crop is safely in and existing commitment have been applied.
The situation in the rest of the world looks a little more comfortable, but not by much. The reason why mills are not too worried about tight stocks this fall is that crops in the rest of the world promise to be quite a bit larger than in the previous two seasons, which should guarantee enough availability after we pass the bottleneck.
So where do we go from here? The physical market is finally becoming more active, although so far it has been mainly China who accounted for the recent buying interest. Nevertheless, after dropping about 120 cents in a matter of just four months, the market looks oversold and we expect prices to stabilize.
If mill buyers were to return in greater numbers, we could even see a bit of a rebound in the weeks to come. However, in order to rekindle any kind of a bull market, we either need a crop problem other than Texas or stronger than expected demand. In our opinion the most likely scenario at this point is a sideways trading range and a pronounced drop in volatility.
Plexus Cotton Limited
Popular News
Leave your Comments
Editor’s Pick
Dr. Michael Duetsch & Man Woo Lee
UPM Biochemicals and Dongsung Chemical
Ritesh Kamani & Neha Kamani
Brand - Khalighata
Esteemed Clients
-Ltd..jpg?tr=w-120,h-60,c-at_max,cm-pad_resize,bg-ffffff "Thermore (Far East) Ltd.")
.jpg?tr=w-120,h-60,c-at_max,cm-pad_resize,bg-ffffff "Telangana State Industrial Infrastructure Corporation Limited (TSllC Ltd)")
.jpg?tr=w-120,h-60,c-at_max,cm-pad_resize,bg-ffffff "Taiwan Textile Federation (TTF)")
