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Market closes 45 cents lower in Chicago
12
Feb '08
The acreage report came out after the close on Friday and this added to the negative S&D report which forced the market lower and triggered some fund sell stops. Open interest remains near the top of the range, but cert stocks continue to grow and demand is weak.

Along with higher world ending stocks and the first drop in Chinese consumption in over 10 years, the cotton prices were unable to hold the lows of the current range. However, even with close to 70,000 futures and 27,000 options, the market managed to close in the 67/70 cent range which has held together for several sessions.

The spec hedge report will be delayed until Wednesday after the options expiration, but we are not expecting any bullish numbers coming out of the reports this week. The weakness today was also seen in the grain markets as we finally topped out in wheat after 4 limit up moves in a row.

The CFTC was forced to make an emergency move on Friday to increase the daily limits from 30 to 60 cents which we managed to hit overnight. However, even though the market was trading much higher synthetically on Friday, the market found some profit taking today and actually closed 45 cents lower in Chicago.

This along with a drop in soybeans and corn allowed cotton to take into consideration the higher than expected 08/09 acreage number (9.54 ma) as well as the increase in ending stocks to test the downside.

The NCC planting intentions survey number was down only 12%from 2007, but some market players had expected a lower number to help the market break upwards. Since this did not happen, the market failed early and managed to break some key support lines under 67 cents. We did close above this level as we ran into good scale down trade buying under 66.50 and bounced back close to 68 before closing weaker.

Fund rolling will continue with only 8 trading days before FND, and unless there is a stopper, we may continue to test the downside.

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