Plexus Cotton market report

09 Mar '07

3 min read

This would give us slightly more than a million bales, including the certificated stock, that need to find a home and given the fact that there is almost no carry available in the market until July, we believe that these bales will be pushed into the export market rather quickly.

Yesterday's 8-14 day weather outlook by the Climate Prediction Center was just what the bulls had hoped for, because it is calling for above normal temperatures and below normal precipitation in the entire southern half of the United States.

This spring like weather will allow intended corn acreage to get planted swiftly and from what we hear corn plantings have started to gain momentum this week in the Mid-South and parts of the Southeast. While there has been a lot of talk about a large acreage shift from cotton into corn and soybeans, favorable weather is a key factor for this to happen and right now the conditions couldn't be better.

We believe that the market severely underestimates the drop in US cotton acreage this season. The National Cotton Council number came out at 13.2 mio acres, while the USDA last week used 13.0 mio acres for its early 2007/08 projections.

Even though most private estimates are now below 13.0 mio acres, we feel that plantings may actually drop to just 11.5 mio acres if the weather continues to play along for corn. Such a drastic reduction is certainly not discounted in the market yet and it may prove to be the catalyst for prices to break out of this monotonous range.

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Plexus Cotton, UK

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