Total commitments for the current season have now reached 10.8 million statistical bales, of which 9.5 million bales have so far been shipped. The USDA just upped its export target for the current season to 10.5 million bales, which implies shipments of another million statistical bales over the remaining eight weeks. This should be an easy target to reach given that current shipments are still at around 200’000 statistical bales a week. As far as 2014/15 exports are concerned, the USDA has set the bar rather low with its 9.7-million bale estimate, considering that existing commitments already amount to 2.4 million statistical bales. This export estimate will likely be revised upward over the coming months, along with the US crop number.
Since falling over a precipice three weeks ago, with December trading to a low of 7700 on May 28, the market has managed to flag sideways over the #
So where do we go from here? Let’s talk about July first! Even though the liquidation of the spot month has been very orderly thus far, there could still be some life left in this expiring contract. With the index fund roll period and options expiration out of the way tomorrow, it will be interesting to see how many longs and shorts remain in the game when the dust clears next week. We expect open interest to amount to no more than 15-20K contracts, but that would still be enough to create some last minute fireworks. We have no clue how this poker game between merchants will end, but if we had to play in it, then only from the long side. The worst thing that can happen to a long at this point is that he has to pay for some certified cotton in the mid 80s, while any short that doesn’t have cotton to back it up is asking for a lot of trouble.
Since falling over a precipice three weeks ago, with December trading to a low of 7700 on May 28, the market has managed to flag sideways over the #
New crop futures follow a different set of dynamics, with rising ROW stocks likely to keep a lid on the market. The improved situation in West Texas has bolstered the bearish case to a great extent, since a larger US crop implies that about half of the ROW stock growth will occur in the US. In other words, if ROW stocks were to rise by let’s say 4 million bales to 43 million bales, then US stocks would probably increase by nearly 2 million bales to around 4.5 million.
Since falling over a precipice three weeks ago, with December trading to a low of 7700 on May 28, the market has managed to flag sideways over the #
However, as we have pointed out before, these stocks will only gradually build into the ROW balance sheet over the course of next season and we therefore have some reservations about being short December, since it may first need to ‘buy’ itself some certified stock, which won’t be that easy at the beginning of harvest if prices are too depressed. We therefore feel that March is the better short to play these new crop dynamics with and for carry to be forced back into the market.
Since falling over a precipice three weeks ago, with December trading to a low of 7700 on May 28, the market has managed to flag sideways over the #
Plexus Cotton Limited