Speculators were successful in driving New York cotton futures down to the 46 cent level. Yet, they lacked the power to force prices any lower.
However, once the December contract went to first notice day for potential deliveries against long futures positions, the market slide halted and trading on Wednesday and Thursday of this week established a technical bottom in the market, just above 53 cents, basis March.
Fundamentally, it does not appear that the market is out of the woods just yet. However, the market adage is, "Never bet against the technicals." Thus, it is likely that the price bottom is in and prices will slip and slide between 50 and 55 cents, basis March into the February time period.
Nevertheless, I would not be surprised to see a temporary slippage below 50 cents if Chinese buying has not begun by very early January.
Suggesting that the price bottom is in is not the same as suggesting that prices will move higher. On the contrary, one should expect cotton futures to spend most of their time fighting to hold the mid fifties until late February or early March.
A pre-plant rally should come from late February to early March as the cotton industry bids up new crop prices in the face of losing 2007 planted acreage to grains and oilseeds. Like the first rally, the pre-plant rally, typically could also be three to five cents.
The combination of the two rallies could be as much as ten cents. However, in no way does that suggest the market will rise above the 60 cent mark.
-Ltd..jpg?tr=w-120,h-60,c-at_max,cm-pad_resize,bg-ffffff "Thermore (Far East) Ltd.")
.jpg?tr=w-120,h-60,c-at_max,cm-pad_resize,bg-ffffff "Telangana State Industrial Infrastructure Corporation Limited (TSllC Ltd)")
.jpg?tr=w-120,h-60,c-at_max,cm-pad_resize,bg-ffffff "Taiwan Textile Federation (TTF)")
