Cotton market appears lifeless

28 Jul '07

3 min read

Dead in the water, so describes the cotton market. The two month rally to nearly 69 cents, basis December has recovered a bit from its seven cent loss of the past two weeks and now climbed back above 64 cents. Nevertheless, the market appears lifeless.

Trading was light all week, but prices did creep higher on the midweek closes. The market 'wants' to go higher, but market fundamentals continue to suggest the world is awash with cotton looking for a textile mill.

While demand does continue strong, supplies continue to overwhelm demand. Yet, December is showing signs of holding near the 62 cent level. Demand is the key and prices can easily move five cents higher-or lower.

The U.S. crop continues to surprise most as crop conditions are generally very good to excellent. A crop above 18 million bales will hammer the market back to the low 60's to upper 50's while a crop near 17 million bales would lift New York back near the 69-70 cent level. Nevertheless, it is demand that holds the master key to price activity.

Certificated stocks have been worked down to some 655,000 bales, still excessive, but about 50,000 bales below that of just a few months ago. Chinese sales of government inventory reserves have been active.

Consistent with the end of the marketing year, weekly export sales were miniscule. Net exports of all cotton during the week ending 7/19/07 were 23,400 RB bales with net Upland sales of 23,700 RB and Pima at anegative 300 RB.

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