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Pressure on cotton prices this week - O.A. Cleveland
28
Jan '08
The past week was an excellent lesson in human emotions, panic, economics, the global economy and protectionism. Just as the market often does…It gives the test first and the lesson afterward. Cotton and other commodity and equity markets came away a bit scarred, but still with a solid base of support for a promising year.

Cotton prices corrected after limit up moves two weeks ago with a limit down move. As stated two weeks ago, cotton prices are headed higher, but with some bloody street fights along the way. Too, the cotton market will remain subject to considerable volatility.

The pressure on cotton prices this week was associated more with the U.S. and global economies and with the other commodity markets more so than with actual cotton fundamentals.

The well documented bursting of the U.S. housing/financial speculative bubble months ago culminated with a panic in the Asian equity markets at the beginning of the week and sent the U.S. equity markets on a free fall. That free fall sparked a panic in the agricultural commodity markets as speculators pulled vast sums of money out of all markets due the panic in the equity markets.

The quick drop in grains and oilseeds sparked a corresponding drop in the cotton market as speculative funds exited the cotton market in mass-most likely the single biggest exit in a single day in the history of the Cotton Exchange.

The Weekly Export Report could almost be renamed to the "Weekly Bearish Report." Recall the massive sales recorded in last week's report, but with most going to Mexico, a captive U.S. market, the big numbers were meaningless. Net export sales for the week ending January 17 totaled a rather anemic 141,000 RB with Upland sales accounting for 108,400 RB and Pima sales of 32,600 RB.

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