It also means that Chinese imports will have to average just 0.88 million bales a month for the rest of the season to get to the USDA target and to absorb the production surplus in the rest of the world. By comparison, China imported an average of 1.68 million bales a month last season and 2.11 million bales in 2011/12.
So where do we go from here? Not much has changed since last week, as the market is still firmly entrenched in a 7-month sideways trend. Traders obviously don’t think that prices will move much in the foreseeable future, since implied volatility has dropped to a very low 19% this week.
However, as we have tried to convey in this report, the market remains quite vulnerable to weather issues and we therefore expect traders to remain on edge for next six weeks or so. If the US crop escapes unscathed, we could eventually see some pressure emanating from cheaper foreign growths, although Chinese support under 80 cents should prevent prices from dipping too much.
Plexus