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Mills take advantage of slide in cotton prices

Jun '08
Cotton began the week with a Limit down move that seemed to be the work of speculators as their selling pressure was highly visible in several commodities. However, mills who had been waiting patiently took advantage of this weeks break to either fix the price of previous purchases or to make new purchases.

Since prices bottomed on Wednesday, an inordinate percent of the volume was in the spreads and switches. The balance of the week, cotton consolidated above the lows posted the middle of the week.

Some attribute this consolidation to a tightening of the basis that makes futures more attractive than spots to cover any new sales, others tie the relative stability to the level of resting demand. After all, the spot month reached its lowest level since last August - the first month of the crop year

Traders were lost to explain cotton's almost perverse attitude on Thursday and Friday. Cotton futures held surprisingly well on Thursday when outside markets were melting down but in equally strange fashion ignored firm outside markets Friday. The Goldman rolls begin this coming Friday.

July lost 377 points for the week and 543 points for the month. Dec cotton lost 364 for the week and 515 for the month.

No doubt, fresh export inquires has picked up sharply last week. Merchants indicate significant sales being put on the books as they continued to reduce inventories. The high premium attached to new crop "should" encourage support for thenearby contract and aggressive near term coverage by mills.

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