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Cotton market loses 65 percent ground since March
21 Nov '08
5 min read
If it weren't for the dismal outlook, one could almost conclude that things are not really that bad in the cotton market. The latest US export sales report showed a relatively strong 203'100 running bales of net new sales, with shipments at 240'900 running bales. For the season, total commitments of 7.3 mio statistical bales are actually 400'000 bales ahead of last year, although when we look at the amount of cotton shipped so far, things don't look quite as good.
Until last week, just 3.7 mio bales have been exported, some 300'000 bales less than a year ago. And in order to reach the current USDA projection of 13.0 mio statistical bales, we would have to export another 9.3 mio bales between now and the end of July, which seems to be a monumental task in the current environment. We feel that we would be lucky to get to an 11.0 mio bales export number, which would still amount to a million bales of exports a month. To whom you might ask?
Tomorrow will be First Notice Day in December and this afternoon Cargill stopped 96% of the 1720 notices that were issued (926 by Allenberg, 754 by Dunavant). There may still be some shorts that overstayed their welcome and as a result December may gain some more relative strength in the days ahead, although it seems to be played out via the spread to March and not in absolute strength.
Typically the Dec/March spread would have to be around 450 points for old crop certificated stock, and it is currently around 400 points below that level.
With the AWP at 34.64 cents for the coming week and trending lower, there is nothing that suggests that the current downtrend is about to end. Merchants are still willing to discount prices of all kinds of origins and until we see this process run its course the AWP will continue to sink and allow the futures market to go down with it.
Some bounces will no doubt occur in the coming weeks and months, but until the overall outlook for the economy improves markedly, these bounces will be sold into by the trade.
Until last week, just 3.7 mio bales have been exported, some 300'000 bales less than a year ago. And in order to reach the current USDA projection of 13.0 mio statistical bales, we would have to export another 9.3 mio bales between now and the end of July, which seems to be a monumental task in the current environment. We feel that we would be lucky to get to an 11.0 mio bales export number, which would still amount to a million bales of exports a month. To whom you might ask?
Tomorrow will be First Notice Day in December and this afternoon Cargill stopped 96% of the 1720 notices that were issued (926 by Allenberg, 754 by Dunavant). There may still be some shorts that overstayed their welcome and as a result December may gain some more relative strength in the days ahead, although it seems to be played out via the spread to March and not in absolute strength.
Typically the Dec/March spread would have to be around 450 points for old crop certificated stock, and it is currently around 400 points below that level.
With the AWP at 34.64 cents for the coming week and trending lower, there is nothing that suggests that the current downtrend is about to end. Merchants are still willing to discount prices of all kinds of origins and until we see this process run its course the AWP will continue to sink and allow the futures market to go down with it.
Some bounces will no doubt occur in the coming weeks and months, but until the overall outlook for the economy improves markedly, these bounces will be sold into by the trade.
Plexus Cotton
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