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Cotton closes 50 pts higher
12
Jan '08
One word can explain what happened to the cotton market today.....CORN! The USDA reports were released today and as far as cotton, wheat and soybeans the changes were neutral to friendly based on the S&D numbers.

However, corn's world ending stocks fell almost 10% from last month and it was almost all related to the changes in the United States with cuts in production and rises in feed and domestic use contributing to lower ending stocks by over 9 million bushels or 25%!

Along with the President signing the new energy bill calling for higher levels of corn based ethanol and poor growing conditions in the Southern Hemisphere, corn locked up the limit (20 cents) on the open and was trading synthetically 40 cents higher than that in the options market.

Volume was above average with 48,000 futures and 46,000 options. The USDA cotton report was fairly unchanged and we attached a summary of the highlights on page 2. However, after two solid pull backs on weak fundamentals which created a negative technical picture, corn managed to drag everything to limit or near limit levels in cotton, soybeans (50 cents) and wheat (30 cents) with cotton actually closing 50 pts higher synthetically.

We are entering a new era of commodity trading and this can be contributed to several factors including the introduction of the ICE electronic trading platform which has exposed cotton to a new world of commodity hedge funds. The neutral to bearish fundamental picture in cotton is not able to resist the record breaking contribution from these new investors.

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