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Imported cotton grabs buyer attention as Dollar weakens

Apr '07
Another week of mixed signals in the cotton market, or was it? New York Cotton futures continued their slide over the last week. Unable to find any support, futures prices have clearly broken down on a deteriorating technical picture with all active months from May to December posting new contract lows.

But with cotton supplies as they are, early season sluggish demand, is this really as big a surprise as it is a painful necessity? The market does not lie! Due to the inequitable nature of the global cotton market, I am in the camp that says, albeit unfortunate and financially crippling, an over supplied and burdensome market must go down before it can come back up.

There are numerous reasons why the cotton price is falling and they are both what is referred to as fundamental and technical factors. The two having the most immediate impact are the ever increasing level of certificated stocks - a fundamental factor and secondly, the deteriorating technical picture or technical analysis.

Certified stocks are clawing their way over 700,000 bales. These are bales that are delivered to the New York Board of Trade. That is, they have not been able to be sold in either the domestic or export market and therefore imply that the best market for the certificated cotton is the futures market itself. The market is searching for a level which is more or less at par with 'cash' cotton. In other words, certificated stock cannot bemore valuable than cotton in the cash market.

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