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Cotton exports prove to be healthier than expected

Mar '07
The new crop December contract touched 60 cents at week's end, but slipped back as the old crop May traded in a 100 point range around 53.90 cents, spending most of its time below 54 cents. Exports proved to be healthier than expected, thus giving hope that Chinese buying may have begun. Nevertheless, the long awaited, and bullish as it was, USDA March Cotton Planting Intentions Report, issued on the heels of the export sales report, failed to provide any market momentum.

As commented last week, the demand for U.S. exports by China and Mother Nature will provide price direction for the market. The May futures contract will continue to trade within its narrow three cent 52-55 cent tracing range. The market will want to see very positive export numbers, but Mother Nature holds the key to any market explosion since the U.S. growers have intentions of planting only 12.15 million acres, 11.86 million acres of upland cotton and 300,000 acres of pima cotton.

USDA's planting intentions of 12.1 million acres of all cotton was lower that any expected, but in line with what growers had been verbally suggesting.

If these intentions become reality, then U.S. growers will cut acreage seeded to cotton some 3.1 million acres compared to 2006 plantings, or down 20 percent from last year. This is a highly significant reduction, if it stands, and most likely will clear a path to 65 cents, basis December futures, with only limited crop development problems in high yielding areas of the U.S.

That is, the market will place a high premium on good weather and crop development. Potential weather scares-too wet, too dry, too hot, and too cold, hurricanes and insect report will draw more attention and thus more human emotion to the cotton market than in any other year of the past decade. And human emotion makes for very volatile markets.

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