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Rebound in grains helps cotton indirectly

Apr '07
Cotton futures started out trading unchanged for much of the electronic session. It was reported that there was some overnight export business though, so there was a general bid hovering underneath the market, especially around the 53.00 cent area.

Grain prices were firmer overnight and in the early session thanks to weather forecasts indicating freezing condition coming into the weekend for much of the mid west and also in the Delta. This freeze would more likely affect the early corn and wheat conditions, but nonetheless the rebound in grains certainly helped cotton indirectly.

Adding to this there was some bull spreading in the May/July which has been very weak of late, and the resultant May buying forced prices up a little through the mid to late session. This spread found some resistance at 125 points having traded as wide as 155 July premium yesterday, but this resistance eased the spread back out to the 140 area by the close.

Outright prices were firming into the close, likely with overnight sales being finally hedged towards the latter session, and finished with gains of 30 to 40 across the board, but closing on the highs. Estimated volume was decent for such a tight range, at 23,703 lots.

Tomorrow morning's US export report is expected to again be decent, with an expectation of 300,000 sales and 250,000 shipments. Cotton Outlook made an announcement regarding their price mechanisms, deciding to revert to the more practical Far Eastern price index rather than the virtually redundant North Europe quote. The 2007/08 season is the last time this North Europe quote will even be compiled for both the A and B indexes.

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