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Cotton growers to keep watch on process of farm bill discussions

Apr '07
Massive export sales and new lows in the cotton market, a phenomena that was not entirely expected. While I though the lows were already in, this weeks action took prices a bit lower. I will get lucky and be correct one day. Nevertheless, it is very difficult not to expect that the lows have finally been established.

However, old crop prices will continue to do little more than tread water and the New York July contract should be expected to fall down to the May values once May goes off the board. The old crop July contract must be content to holds the lows made on the May contract. The new crop contracts will tread water for a brief time, but the acreage reduction in the U.S. and a few planting scares will support the new crop December contract at its current level.

Net upland cotton sales for export for the week ending April 12 totaled a marketing year high of 795,800 bales. These sales were made as the market fell below 51 cents in May. China was the primary buyer, taking 489,600 bales. Turkey purchased 108,400 bales. Further, it appeared that physical sales were very active all of this week. Thus, a big export number should be expected next week.

Yet, with a marketing year export high, why did the market sink to new lows? Actually, there are as least two reasons with one being the export equation itself. February marked the seventh consecutive month that U.S. export shipments (as opposed to export sales) failed to top one million bales. With shipments averaging considerably less than a million bales in the first seven months of the marketing year, it brings into question the USDA export forecast of 13.5 million bales. The short answer-likely not.

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