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Swiss Financial Service's cotton commentary for week beginning

Mar '07
An early week dip in prices uncovered commercial support likely tied to export demand. However, the market acted listless and featureless until Wednesday when a string of nine consecutive closes between 5300 and 5400 was broken as speculators bought aggressively based on technical considerations.

The commercial trade took advantage of the move towards 1,100 over the AWP to put out hedges. The pattern of spec buying into trade hedge selling continued for the remainder of the week. For the week, May cotton gained 61 points while new crop December cotton closed 22 higher for the period.

The AWP moved higher for the third straight week. This weeks AWP was announced at 4367, a gain of 17 points which of course dropped the LDP by a like amount to 8.33 cents per pound. Loan redemptions were announced Friday at a surprisingly low 307,158; not that much more than the previous weeks 300,459.

Guesses had been that possibly as many as a million bales had been redeemed. Either 1,100 over attracted far less producer selling than expected (bullish) or merchant demand was much less than expected (bearish) - not at all sure which is correct.

Fridays USDA report was pretty much as expected. The only real surprise was the increased production in India. The big changes: cut in US exports, increase in US ending stocks, cut in Chinese imports and increase in Indian production were all bearish but, unlike the reaction in February, the market shrugged the report off.

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