NY cotton futures move sideways this week

If natural gas liquids and biofuels are added to crude, then the US will become the world's biggest producer of liquids in 2013 with 12.1 million barrels/day, ahead of Saudi Arabia and Russia. Including other energy sources such as natural gas, coal, solar and wind, the US is currently meeting 87 percent of its energy needs and is on its way to become energy independent. With Canada added to the equation, it is already there! By contrast, the EU produces less than 50% of its energy needs and dependency on crude oil imports is at over 80% and for natural gas it is over 60%.

This US energy boom has far-reaching economic and geo-political implications. With US oil imports at just 40 percent of 2005 levels, the US trade deficit is improving rapidly and the fact that the US can offer cheaper energy to companies than other countries is bringing some manufacturing back to the States, especially since labor arbitrage is less of a factor these days in view of improved automatization and robotics. Definitely something to consider before getting too negative on the US economy and the dollar!

So where do we go from here? Prices are still in a long-term sideways trend, with long and short-term moving averages basically flatlined, volatility at a multi-year low and momentum almost nonexistent. As long as China keeps absorbing the surplus in the rest of the world, stocks outside China won't change much and the market may therefore not have a lot of wiggle room going forward.

Looking out for potential game changers, a Chinese policy shift is still on top of the list, although we don't think that it would necessarily have to be bearish like most analysts believe. Weather is still a factor at this point, although harvest conditions have been surprisingly benign so far and time for something bad to happen is soon running out. All things considered we currently see no reason for the market to break out of its boring sideways trend.

Plexus