Another boring day in the cotton futures market as the high and low were set in the first 15 minutes, only 40 pts apart on light volume of an estimated 12,000 contracts. Open interest continues to rise to record levels near 220,000 contracts even though the market seems very quiet which could be new spec shorts entering the market.
There are rumors of spec sell stops under 53.00 in K'07 as the spreads continue to widen with most switches happy to roll all the way out to December anywhere near 550 pts.
Prospective plantings are coming out next Friday from the USDA with estimates between 12.0 and 12.8 million acres. With a possible 1.0 million acre decrease from the NCC report last month falling on the last trading day of the month and quarter, we could have the possibility to break out of the 150 pt range we have been stuck in over the last 4 weeks between 53.00 and 54.50.
Pre planting soil moisture in South Texas is looking much better compared to last season and everything is on schedule to see a good start to the crop. Even with lower acres estimated to be coming, we will have the ingredients at the beginning for lower abandonment and higher yields.
Cert stocks continue to rise to 632,000 b/c as well s 32,000 awaiting review. This is a good sign for the spreads to continue widening out as the loan stocks fell another 240,000 b/c last week which brings the number to 11.3 mb left in the loan.
The A index continues to stay steadyas we have been in a very tight range with the quiet market, but Cotlook did raise the location adjustment to North Europe 31 pts to 1641. This made the AWP for next week come down to a theoretical of 43.34 which is right in the middle of the last 10 weeks official AWP's from a low of 42.61 to the high last week of 44.06.
This steady to weak AWP along with a NY that seems to be slipping slowly without any signs of a strong stopper on the K'07 continues to look bearish near term. Technically the market has set a triple top at 53.60 and unless we get a very friendly acreage report next Friday, the specs may decide to go short again and test the lows.