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Mills take advantage of weak cotton futures
24
Jul '08
Wednesday session experienced a near 300 point range movement. Early morning trading was quiet as cotton market was influenced by outside commodities weakness. December contract gradually pushed to today's low at 70.78, below the bottom of the near term trading range, which was created on July 8th.

As mills took advantage of the NYF weakness and booked some cash business, trade buying supported the market from moving further lower. Around noon futures trading started taking off with close to 2,500 contracts bought on the screen and no activities seen in the options pit. This fast movement reversed all cover months to trade in the positive area and up to 210 points higher.

Dolly became a category 2 hurricane. The movement toward landfall was slow and the maximum sustained winds were near 100 mph. The estimated 24 hour rainfall for some extreme Texas locations is already nearing 6 inches, while forecasted range will be 6 to 12 inches south of Corpus Christi and into northern Mexico. While the worst possible damage to the crop that could be caused by Dolly is not feared by the market, the weather conditions in India are more in the center of attention.

Due to lack of the usual high content of rain during the summer monsoon season, the next 15 days seem to be very important. There's also news that all cotton export contracts are now required to be registered with the Textile Commissioner of India prior to shipment, and only shipments under registered contracts will be allowed clearance through customs. This sounds like more paperwork for the exporters.

Cotton, at the moment and after having lost nearly 10 cents since end of June, seems to have found a comfortable short term sideways trading area. Influenced by stronger dollar and softer overall commodities market today, Z'08 low made it to the bottom of the range, even below the previous low of 70.86. But the technicals seemed to have encouraged explosive spec buying activities.

The possible damages to be caused by Dolly is still to be seen, but we're only talking about a moderate size of acres. The range is still likely to hold, but the market is definitely keeping an eye on the potential of Z'08 challenging the 74.20 level.

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