NY cotton futures manages to halt decline this week

06 Oct '12

4 min read

US export sales for the week ending September 27 were above expectations at 248’000 running bales for both marketing years, with China once again leading the pack with 117’800 running bales. Of note is the fact that 15 markets participated in the buying, which tells us that US cotton is quite competitive at current prices and that other origins may not be as readily available at this point. Total commitments for the season now amount to 5.8 million running bales, of which just 1.5 million have so far been shipped.

So where do we go from here? Crops are still vulnerable at this point and a lot will depend on the weather over the next 3-4 weeks. If there are no more hiccups and quality deterioration remains contained, then we should see a resumption of the downtrend as we head into the end of the year, with values possibly retesting the June lows. However, if we get a wet harvest and quality becomes a bigger issue, then NY futures should find decent support around current levels.

The longer-term picture remains friendly in our opinion, since the current 17-to-1 ratio between Dec’13 cotton and Nov’13 soybeans still portends a large acreage shift out of cotton next season. In other words, while we remain cautiously bearish in the near term, we shall be looking for an opportunity to enter the long side going forward.

Plexus Cotton Limited

More Textiles News - United States Of America...