So where do we go from here? Crops are still vulnerable at this point and a lot will depend on the weather over the next 3-4 weeks. If there are no more hiccups and quality deterioration remains contained, then we should see a resumption of the downtrend as we head into the end of the year, with values possibly retesting the June lows. However, if we get a wet harvest and quality becomes a bigger issue, then NY futures should find decent support around current levels.
The longer-term picture remains friendly in our opinion, since the current 17-to-1 ratio between Dec’13 cotton and Nov’13 soybeans still portends a large acreage shift out of cotton next season. In other words, while we remain cautiously bearish in the near term, we shall be looking for an opportunity to enter the long side going forward.
Plexus Cotton Limited