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May & July cotton contracts may get a minor boost

Jan '07
The cotton market is struggling to find news that could push it higher-or lower for that matter. Yet, more and more it appears that the March futures contract is destined to quietly fade away in the mid 50 cent range, just where it is now. There may be a peek or two above 56 cents, but likely the market will come back, holding in the 52-56 cent range trough the March expiry.

The May and July contracts could get a minor boost from reduced plantings in the US and abroad. However, any real boost in prices will occur only in the December contract. The forthcoming imbalance in supply demand favors higher prices for the May and July contracts. Yet, without a surge in export sales, those two remaining old crop contracts are destined to add only a couple more cents at best. However, December waits on planting intentions and the spring planting season to decide if it is to ease higher week by week or to simply leap higher in three or four jumps.

The export market did offer a bit of fresh news this week as net sales of upland cotton for the week ending 1/11/07 totaled 257,600 bales, nearly double the prior four week average. The real news in the report was that China was a good, not great, buyer. Chinese mills purchased 78,500 bales, the first real volume in some three months. Yet, we should not assume that the doors to China have finally been opened. Some small quotas are being filled. Hopefully, volume purchases will come by March.

China's big buying this week could indicate that the 2006 Chinese crop will be no larger than USDA's January estimate of 30.75 million bales, 750,000 bales more than the November estimate. However, it could still be as much as 500,000 bales greater than the January estimate. Either way, China is expected to come to the US for seven or eight million bales of imports.

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