With the U.S. and other cotton crops across the Northern Hemisphere either just going into the ground, or in the early stage of crop development, it is far too early too judge production. Too, plantings will continue for another month. Normal or even slightly better than normal crop development would not be supportive of prices in the short term. However, if crop development is no better than "normal" then, longer term, the market will be pulled slightly higher.
While world carryover stocks are expected to be drawn down some four million bales during the 2007-08 season, the market, now and for the remainder of calendar 2007, will focus on the fact that 2007-08 carryover will remain above 50 million bales. Thus, in the absence of a yield disaster, the December contract will find difficult climbing above 55-58 cents.
Calendar year 2008 will likely present a different picture as the cotton acreage shifted to feed grain production in 2007 will likely remain in feed grains for the 2008-09 season. Nevertheless, commodity markets are, if anything, volatile. Thus, December will swing higher and lower as the year progresses.
As suggested last week, the cure for the current low price is a few more months of low prices.