Although this rumor has yet to be confirmed, any release of reserve stocks would be bearish, because it would come at the expense of imports.

So where do we go from here? Although technical traders and hedge funds may give the market another boost in the very short term, based on a constructive chart and a more positive macro outlook, the impending harvest is likely to change the balance of power in favor of the trade, as it provides it with a lot more ammunition to sell.

The historic discrepancy between cotton and soybean/corn prices will come to the fore at some point in the future, but not just yet. First the cotton market will have to chew through a near record supply of cotton (only seasons 2006/07 and 2007/08 had more availability), most of which remains unsold at this point.

We therefore expect prices to retreat in the October/November time frame, possibly to below 70 cents, which would set the stage for a longer-term advance when we face planting decisions in the first quarter of 2013.

Plexus Cotton Limited