NY futures close slightly higher this week

06 Mar '10

5 min read

During this week's ICA/Cotlook conference in Singapore, with over 400 attendees from the cotton trade, a couple of merchants presented a fairly bullish outlook on cotton prices, drawing the audience's attention to the extremely tight statistical situation we are currently in, a situation that will possibly take more than just one season to remedy. Although many mills still seem to be fairly calm and collected at this point, we believe that this conference has created a heightened sense of urgency in regards to covering or fixing any outstanding needs between now and new crop.

So where do we go from here? Close was slightly below the steep uptrend channel that has been in force since February 5th and we may therefore see a pause in spec buying or even some profit-taking. This may open the door for a correction down to 78-79 cents. Much will depend on where the trade will come in to support the market, but given that there is not much supply pressure at this point and that mills still need to fix and buy substantial quantities in the months ahead, we feel that there is going to be strong support once values dip below 80 cents. Given the large short position the trade still needs to deal with, we don't believe that we have seen the highs of the season yet.

New crop is still anybody's guess, but we agree with the notion that the tight supply situation from which we are going to emerge this summer will probably linger well into next season. There is not much margin for error in regards to the coming crop and if we can believe some of the long-range weather forecasts we may be looking at another challenging growing season.

Plexus Cotton Limited

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