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May & July cotton contracts may get a minor boost
20 Jan '07
3 min read
In the back of my old worn out mind, I keep thinking we will awaken one morning and find New York futures open up its three cent limit. Scrambling with amazement we soon realize that the Chinese spent the night buying cotton in volume from various cooperatives and merchants. (Recall the Soviet grain purchases in the early 1970's). Thus, the party will be over, before we even knew about it.
The primary reason for the lack of US export sales to China is not due to the bumper crop China had in 2006, but rather to the bumper crop India had in 2006. The Indian textile industry, second only to China, while rapidly expanding, has not grown as fast as Indian cotton yields. India has always been a sleeping giant with respect to cotton yields.
No longer is that giant sleeping. Indian textile capacity will catch up with the increasing local production. However, in the meantime India will be a very aggressive exporter of excellent quality cotton and the Chinese mills will scoop up as much as they can. India's desire to move its excess cotton has left US cotton in a very non competitive position in the world market. The large volume of good quality cotton in India will keep the US on the sidelines for another one to two months.
US merchants are discovering that the best price they can get for US cotton in from the futures market. Thus, certificated stocks are on the verge of rising, keeping a lid on the March contract.
The primary reason for the lack of US export sales to China is not due to the bumper crop China had in 2006, but rather to the bumper crop India had in 2006. The Indian textile industry, second only to China, while rapidly expanding, has not grown as fast as Indian cotton yields. India has always been a sleeping giant with respect to cotton yields.
No longer is that giant sleeping. Indian textile capacity will catch up with the increasing local production. However, in the meantime India will be a very aggressive exporter of excellent quality cotton and the Chinese mills will scoop up as much as they can. India's desire to move its excess cotton has left US cotton in a very non competitive position in the world market. The large volume of good quality cotton in India will keep the US on the sidelines for another one to two months.
US merchants are discovering that the best price they can get for US cotton in from the futures market. Thus, certificated stocks are on the verge of rising, keeping a lid on the March contract.
O.A. Cleveland
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