NY futures rally this week

15 Feb '08

3 min read

Outside markets certainly contributed their part, with the CRB racing to a record high of 384.39 and new crop corn and soybeans both closing at new contract highs today. News on the economic front was positive for a change, as retail sales in the US were surprisingly resilient last month and Japan reported that its GDP rose at a much better than expected 3.7 percent in the fourth quarter.

There were plenty of rumors regarding the fate of the certificated stock, which saw an overnight drop of almost 23'000 bales, even though official 'decerts' were listed as less than 3'000 bales. Even though the current stock of 520'325 bales plus the 66'580 bales awaiting review amount to a still sizeable 586'905 bales, we need to be aware of the fact that as of February 11 there were just 73'916 bales of 2007/08 crop listed.

This is significant because all bales from previous crop years will be given a 200 point penalty if tendered against the March contract, which means that for all practical purposes the tenderable cert. stock has to be regarded as very small unless a narrowing of the spread entices additional deliveries, including the stocks from previous years.

Adding further fuel to the fire today were mill fixations, since there were still 1.4 mio bales open on the March contract as of last Friday. With the market trending lower earlier in the week, many buyers were waiting for an even lower price to get their fixations done. Today's limit up move must have come as a shock and mills may now find themselves in a situation where they are chasing after the market.

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