Lower world cotton crop may lead to surged demand

08 Sep '07

3 min read

New York futures continue to work the 60 cent area as dips below that level uncover mill demand. Trading above 60 cents has been met with scale up trade selling and limited speculative selling.

The market will now focus on USDA's September 12 supply demand report and expectations about that report. In the interim the 60 cent mark should serve as a market fulcrum. The market will continue to press above the 60 cent level, working its way toward 63 cents.

Certificated stocks have finally seen a significant decline and now stand at near 485,000 bales. While this is still burdensome, "decerts" over the past two weeks indicate mill demand is on the robust side.

The decline in certificated stocks was the primary factor in higher prices the past six trading days. These stocks need to move below 150,000 bales to keep them from acting as a drag on the market. While that may be in the cards, I do not look for such a decline during 2007 and most likely not until late 2008.

Export demand, while remaining strong, slipped a bit compared to the prior three weeks. Net sales for the week ending 8/30/07 totaled 278,900 RB with Upland being 276,900 RB and Pima sales of 1,900 RB. Primary buyers were China (116,700 RB), Turkey (44,300 RB), Indonesia (33,700 RB) and Thailand (24,500 RB).

Exports soared above sales for the first time this year as total shipments were 334,600 RB with Upland at 325,400 RB and Pima shipments at 9,200 RB. China,Mexico and Turkey were the primary destinations.

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