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Export sales report fails to cheer cotton market

04
May '07
Light volume today as the market traded in a tight range that was set by 30 pts lower in the electronic trading to 30 pts higher in the open outcry within the first hour. The rest of the day was spent near unchanged as the market was not too excited about the export sales report. Sales were respectable at 401,000 running bales, but 21% lower than last week with 100,000 bales going to China and 60,000 each going to Turkey and Pakistan.

Considering the weak U.S. dollar and NY futures trading at life of contract lows, there is concern why sales are not stronger. Shipments remained above average at 346,000 bales but well below where we need to be to hit the USDA target of 13.5 million bales. At the moment, we are estimating it could be closer to a 350,000 b/c average for the remainder of the marketing year and that would put us closer to 12 million bales and increase ending stocks above 10 mbs and close to 60% stocks to use!

In the short term, cert stocks remain over 700,000 b/c, full carry on the board does not encourage cheap sales even at these levels, over 10 million bales in the loan that have to be redeemed and hedged over the next 3-4 months or worst case defaulted and put out in large government catalogs. Plus the spec and fund pressure in the short term, does not look very optimistic for a nearby rally. Go Mavs!

Volume was below average today with about 50% trading electronically on a combined 9,500 futures with 4,900 calls and 3,600 puts. We are now forming fairly strong resistance above 49.00 cents and even have a gap between 48.95 and 49.25.

Planting has fallen behind compared to last year at this time with too much moisture in Texas and not enough in the Delta. The West is on schedule and there is still plenty of time, but certainly this could be an issue by the end of the month.

Click here to view graphical presentation:

ECOM USA Inc


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