Gains & losses at NY futures this week

10 Apr '10

5 min read

US export sales continued at a fairly brisk pace considering the high price level and the limited availability. Last week's sales amounted to 236'100 running bales of Upland and Pima cotton for both marketing years combined, while shipments clocked in at 325'600 running bales. For the current season total commitments now amount to 10.5 million statistical bales, whereof 7.2 million has so far been exported. It was interesting to see how widespread the buying was, with no less than 19 countries participating.

So where do we go from here? The market is once again at a razor's edge, trying to find support where it held during the previous two corrections. However, we believe that speculators are not quite done liquidating and that we could see some further losses in the days ahead. Tomorrow's USDA report may give the market something positive to reflect on, but we don't think that spec longs who want to get out will care much. We therefore need to brace ourselves for a market that may temporarily overshoot to the downside. If that were to happen, it would present the trade with an excellent opportunity to get out of remaining basis-long positions and to fix on-call sales (still 3.6 million in May and July!), which would set the stage for a V-shaped rebound. This sell-off is caused by speculators getting out of longs, not by any supply pressure in the physical market and we therefore see this as just another correction, potentially a steep one, but not as a change in the overall direction of the market. Not just yet! We still feel that current crop futures have at least one more run to the upside left.

Plexus Cotton Limited

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