Cotton futures fall precipitously this week

30 May '08

3 min read

However, apart from this large US ending stock number and the apparent liquidity issues that need to be dealt with over the next few months, we shouldn't lose sight of the fact that as we head into the 2008/09 marketing year, total US supply will only amount to about 24.4 mio bales, if we pencil in a crop of 14.5 mio bales for next season. Therefore, total US supply will be around 4.2 mio bales less than in the current season and 3.2 mio bales less than last year.

Last week we talked about the on-going investigation by Congress and the CFTC into the inner workings of commodity futures markets, particularly in regards transactions related to Index Funds. Today the CFTC announced that it had already been investigating price manipulation in energy markets for the last six months and that it was taking the unusual step of publicizing it "because of today's unprecedented market conditions."

The CFTC further said that it reached an agreement with its British counterpart and ICE London to expand its surveillance of energy futures contracts with US delivery points. Congress earlier this month gave the CFTC greater oversight of unregulated electronic exchanges, such as ICE, in order to deter price manipulation and fraud.

A Senate investigation into collapsed hedge fund Amaranth found that it had shifted its activities to ICE from the regulated NYMEX to avoid trading limits and this practice seems to be commonplace, not just in energy markets.

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