Interviews
Cotton production forecast stands at 17.5 mn bales
24 Jul '07
4 min read
Forecast. The 2007/08 price outlook remains framed by the July 12 USDA WASDE report which forecasts 2007 U.S. production at 17.5 million bales and ending stocks under 5.9 million bales. In percentage terms, the forecasted ending stocks translates into a forecasted stocks-to-use ratio of 27.6%.
In supply/demand terms, this forecast paints a modestly bullish picture for new crop cotton prices, enough to support Dec07 in the low 60s.The fundamental underpinnings of Dec07 can be further examined by comparing forecasted stocks-to-use at the same point in time (i.e, the preceding July) which were influencing Dec04, Dec05, and Dec06 prices
Under the influence of the current 27.6% stocks-to-use forecast, Dec07 is trading roughly seven cents higher than previous December contracts at this time period. Yet Dec07 stocks-to-use is in between the forecasted stocks-to-use of Dec04 (26.3%), Dec05 (33%), and Dec06 (22.2%) .
Those futures contracts were trading in the mid-50s during the preceding July. This highlights to me the influence of non supply/demand forces on cotton futures, e.g, maybe speculative selling on Dec04, and definitely speculative buying on Dec07.
Having said that, upside price volatility is likely given the trend of tightening foreign stocks which could lead to price spikes given the perception of supply problems. There is a lot of focus on the fact that Chinese mills are using up their domestic reserve stocks rather than buying expensive foreign cotton.
Some view this as bullish, thinking that China must come back eventually with strong purchases. However, it is plausible that they are trying to bridge the supply gap between now and September when their new crop supplies start becoming available.
The possibility of a decent Chinese crop and nearby exportable surpluses from India suggests a lot of uncertainty about how much buying they will have to do this fall.
The low level of U.S. planted acreage heightens the focus on U.S. yield potential, as predicted by weather and crop condition.
In supply/demand terms, this forecast paints a modestly bullish picture for new crop cotton prices, enough to support Dec07 in the low 60s.The fundamental underpinnings of Dec07 can be further examined by comparing forecasted stocks-to-use at the same point in time (i.e, the preceding July) which were influencing Dec04, Dec05, and Dec06 prices
Under the influence of the current 27.6% stocks-to-use forecast, Dec07 is trading roughly seven cents higher than previous December contracts at this time period. Yet Dec07 stocks-to-use is in between the forecasted stocks-to-use of Dec04 (26.3%), Dec05 (33%), and Dec06 (22.2%) .
Those futures contracts were trading in the mid-50s during the preceding July. This highlights to me the influence of non supply/demand forces on cotton futures, e.g, maybe speculative selling on Dec04, and definitely speculative buying on Dec07.
Having said that, upside price volatility is likely given the trend of tightening foreign stocks which could lead to price spikes given the perception of supply problems. There is a lot of focus on the fact that Chinese mills are using up their domestic reserve stocks rather than buying expensive foreign cotton.
Some view this as bullish, thinking that China must come back eventually with strong purchases. However, it is plausible that they are trying to bridge the supply gap between now and September when their new crop supplies start becoming available.
The possibility of a decent Chinese crop and nearby exportable surpluses from India suggests a lot of uncertainty about how much buying they will have to do this fall.
The low level of U.S. planted acreage heightens the focus on U.S. yield potential, as predicted by weather and crop condition.
Popular News
Leave your Comments
Editor’s Pick
Apparel/Garments
Apr 28, 2024
2 min read
Retail
Apr 28, 2024
2 min read
Apparel/Garments
Apr 28, 2024
2 min read
Esteemed Clients
-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)")
