NY cotton futures edge up marginally this week

28 Sep '13

5 min read

Last week’s US export sales of 87’400 running bales of Upland and Pima were labeled as ‘disappointing’ by most commentators, although they seem to forget that old crop stocks are mostly gone and new crop is not available in any volume yet.

Merchants are reluctant to commit high grades at this point due to the uncertainty regarding the quality of this crop and they certainly can’t ship bales that don’t exist. The fact that 18 different markets were buying US cotton last week shows that there is still widespread interest and we believe that sales will pick up once the crop is off the field.

One development that has the potential to affect financial markets is Washington’s stalemate about raising the ‘debt ceiling’. Democrats and Republicans seem hopelessly deadlocked at this point and although we have seen these standoff theatrics before, only to be resolved in a last-minute deal, we get the impression that the situation is more serious this time around.

According to the Treasury the US is about 3 weeks away from a ‘technical default’, which would wreak havoc in the markets, especially since Wall Street is currently quite nonchalant about it.

The President has already publicly stated that he won’t negotiate over raising the debt ceiling, while Republicans are adamant that they would only agree to it if there were some major concessions, such as a delay of “Obamacare”, the building of the Keystone pipeline and means testing for Medicare.

With neither side willing to budge, the US is once again being pushed to the brink of a government shutdown and a first ever default on its obligations! Let’s hope that sanity prevails, but be prepared for the unexpected!

So where do we go from here? Traders don’t quite seem to know what to do with this market at the moment. On the one hand one could argue that there is plenty of cotton around the globe to put pressure on prices, but as long as China stands ready to import large quantities on price breaks, the downside seems to be rather limited.

At the same time there isn’t really any compelling reason for the market to run away to the upside either, unless adverse weather becomes an issue. Shorts will likely remain nervous until the bulk of the crops is in, but unless there are some major setbacks, the market is probably going to remain in a sideways trend.

Plexus Cotton Ltd

More Textiles News - United States Of America...