US export sales of 249'700 running bales of Upland and Pima were quite supportive, although these sales were made when the market traded several cents lower. For the current season sales have now reached 14.1 million statistical bales, of which 11.8 million have so far been shipped. For the 2009/10 marketing year commitments are currently at 1.0 million bales.
If the US ships 12.7 million bales by the end of July as the USDA predicts, then commitments for the coming season will already be at 2.4 million statistical bales on August 1st, based on what is on the books today. Considering that the current export target for next marketing year is only 10.8 million bales, the US can be quite relaxed in regards to its export business.
As we have stated repeatedly, the fate of the US dollar plays an important role when forecasting trends and recent news out of China is signaling more trouble ahead for the greenback. Earlier this week it was reported that China will raise the subject of finding an alternative to the US dollar as the global reserve currency at next week's "G14" summit. Today we learned that China will allow companies to use the Yuan to settle cross-border trade, even offering tax rebates for doing so. So far companies had to convert Yuan into US dollars or other currencies to settle international trade.
China is clearly pushing an agenda to turn the Yuan into a global currency. The People's Bank of China recently agreed to provide a total of 650 billion Yuan to Argentina, Belarus, Hong Kong, Indonesia, Malaysia and South Korea through currency swaps. A couple of months ago China and Brazil agreed to study a proposal to move away from the US dollar for trade settlements and use Yuan and Reals instead.
Efforts by other countries to bypass the US dollar at a time when the US needs to finance the biggest deficits in history are worrisome to say the least. We therefore expect the US dollar to weaken further over the coming months and this in turn should be supportive for commodity prices.
So where do we go from here? From a fundamental point of view the futures market is too high compared to what mills are prepared to pay for physical prices. It would therefore not surprise us to see December sell off again, as it has done on previous occasions. However, speculators and fund investors seem to have found renewed interest in our market and they certainly have the means to take out nearby resistance and propel values higher. We are therefore watching these chart points with a nervous eye and need to be quick to react in case the resistance area is taken out!
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.jpg?tr=w-120,h-60,c-at_max,cm-pad_resize,bg-ffffff "UBM China (Shanghai)")
-Ltd..jpg?tr=w-120,h-60,c-at_max,cm-pad_resize,bg-ffffff "Thermore (Far East) Ltd.")
