Cotton planting acreage to drop short of projections

25 Feb '08

2 min read

There were 1,621 delivery notices issued against the March contract. JP Morgan, believed to be for the account of Cargill, issued 1,270 and Dunavant 228. The big long is Allenberg catching 1,545 which, of course, means they have 95 percent of the long positions. In retrospect, very possibly last weeks spec/hedge which showed commercial "house" longs holding fully steady was the clue that a MMM "house account" was the big long. As of last Tuesday, there were 125,231 bales from the 2007 crop. However, that statistic will be updated Monday.

Cotton prices caught fire on extremely heavy volume as both commercials and speculators rushed to cover positions in March in "panic proportions." Strength in March contract was primarily attributed to a lop-sided 20 to one imbalance of unfixed sales to mills vs. unfixed purchases from producers. Going into Friday, there were still well over 10,000 March still open, which made for a volatile ending to a volatile week that included two limit moves.

May cotton, on the other hand, caught the fancy of technically oriented speculators as well as large funds and money mangers. Cotton has long been looked at as a laggard in the commodity complex and generally as under valued from comparable row crops. With the Commodity Research Bureau Index posting all time highs each day this past week – gold, silver, soybeans all making all-time highs and cotton breaking out of a multi-week consolidation area, buyers rushed to participate.

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