Cotton exports register impressive figures

05 May '08

4 min read

Certificated stocks have posted record highs every single session since March 27th. As the week came to an end there were potentially 1,355,759 bales eligible for delivery. It would now look as if the May contract will take care of less than 400,000 bales. So it doesn't take much imagination to believe that the July contract will have to deal with a million bales or ten percent of the 2007/08 carryout.

The export sales report this past week provided glimmers of hope although it certainly didn't help the market Thursday. This weeks report, the biggest of the year, showed an impressive 640,000 bales sold to an equally impressive 20 different destinations. However, sales are not the problem. All we need to do is sell an average of about 160,000 bales to meet USDA's hopes.

Shipments on the other hand are another matter. Shipments last week were only about 55 percent of that we need to ship each week. For the US to reach the export number projected by the USDA in last months report, we need to average shipping about 350,000 bales per week.

Also worrisome is the fact that much of the US cotton is still being sold at bargain basement, fire-sale prices to raise capital. This would indicate that the fallout and damage from the horrendous market conditions the first week of March, is not only still with us but will probably be so for some time to come.

Next Friday morning, the USDA supply/demand report for May will give us a first glimpse of their initial estimates for 2008-09 as well as the final data from the 2007-08. Even though this last month's domestic consumption report was depressingly below USDA's projection, it is doubtful that without further evidence of a weakening economy, USDA will monkey with that that statistic – at least not yet.

No one argues that with increasing amounts of consumers' incomes devoted to keeping gas in the tank and food on the table, spending on household furnishings and clothing is at risk. On the other hand, I doubt anyone will be surprised to see the USDA reduces their estimates of US exports for this year once again.

Technically, Friday was an "inside day" so a close above or below Thursday's outside range day is needed to provide a significant signal. Bulls would need a close in July above 7243 and December 8072 - a tall order indeed. However, a close for July above 7180 would exceed the 9 day moving average and begin a bullish crossover for the 20 day stochastic from a very low level. Any bounce shy of 7180, basis July, would be suspect.

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