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The sell off in cotton may have started to accelerate yesterday amid signs that recent price gains may be curtailing export sales. General strength in the dollar in recent days is making US cotton even more expensive, despite a moderate setback in the dollar overnight. In fact, since the surge to a new high for the year in the dollar this week came after the end of the latest reporting period for US export sales, this raises the possibility of a further slowdown on next week’s Export Sales report. This week’s net export sales for cotton came in below trade expectations at 86,200 running bales for the current marketing year and 26,600 for the next marketing year for a total of 112,800. As of March 18, cumulative cotton sales stand at 82.4% of the USDA forecast for 2009/2010 versus a 5 year average of 79.2%. A few more weeks of sub-par sales could put us behind the 5-year average pace. At this point, old crop sales need to average 101,000 running bales each week to reach the USDA forecast. The monthly Cotton Consumption report was also out yesterday. It showed US factory consumption of domestic and foreign cotton at 266,955 bales in February, about unchanged from the previous month. Stocks held by mills rose to 151,758 bales from 141,115 bales last month. Initial Jobless Claims came in marginally lower than expected yesterday at 442,000 which was a 6-week low. Yesterday’s price action started on the positive side. May cotton chopped sideways at generally higher levels overnight, but selling by funds pushed the market lower during the morning hours and into early afternoon with a final push below Wednesday’s low prior to the close. Stocks registered for delivery against the ICE No. 2 contract rose for the sixth day in a row yesterday to 772,800 running bales from the previous day’s total of 760,852 running bales.
TODAY’S GUIDANCE: Selling in cotton appears to be tied to slowing of export demand at higher prices. Since export demand combined with a limited old crop supply has been the key factor behind the long term rally in cotton, this bears watching. Another negative factor may be the relatively anemic rally we saw to start the overnight session despite a moderate break in the dollar. Trend-following funds are still net long by over 54,000 contracts in cotton and that could generate a consistent source of selling pressure if the market moves lower today and into the start of next week. First support is now down at 78.47 to 78.70 in the May contract. First resistance is now at 81.84 to 82.00.
TODAY’S MARKET IDEAS: Traders should look to lighten up on long positions.
Cotton Market Commentary – 2010.03.25
by Terry Roggensack on March 26, 2010
Below is a sample of our Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!
The sell off in cotton may have started to accelerate yesterday amid signs that recent price gains may be curtailing export sales. General strength in the dollar in recent days is making US cotton even more expensive, despite a moderate setback in the dollar overnight. In fact, since the surge to a new high for the year in the dollar this week came after the end of the latest reporting period for US export sales, this raises the possibility of a further slowdown on next week’s Export Sales report. This week’s net export sales for cotton came in below trade expectations at 86,200 running bales for the current marketing year and 26,600 for the next marketing year for a total of 112,800. As of March 18, cumulative cotton sales stand at 82.4% of the USDA forecast for 2009/2010 versus a 5 year average of 79.2%. A few more weeks of sub-par sales could put us behind the 5-year average pace. At this point, old crop sales need to average 101,000 running bales each week to reach the USDA forecast. The monthly Cotton Consumption report was also out yesterday. It showed US factory consumption of domestic and foreign cotton at 266,955 bales in February, about unchanged from the previous month. Stocks held by mills rose to 151,758 bales from 141,115 bales last month. Initial Jobless Claims came in marginally lower than expected yesterday at 442,000 which was a 6-week low. Yesterday’s price action started on the positive side. May cotton chopped sideways at generally higher levels overnight, but selling by funds pushed the market lower during the morning hours and into early afternoon with a final push below Wednesday’s low prior to the close. Stocks registered for delivery against the ICE No. 2 contract rose for the sixth day in a row yesterday to 772,800 running bales from the previous day’s total of 760,852 running bales.
TODAY’S GUIDANCE: Selling in cotton appears to be tied to slowing of export demand at higher prices. Since export demand combined with a limited old crop supply has been the key factor behind the long term rally in cotton, this bears watching. Another negative factor may be the relatively anemic rally we saw to start the overnight session despite a moderate break in the dollar. Trend-following funds are still net long by over 54,000 contracts in cotton and that could generate a consistent source of selling pressure if the market moves lower today and into the start of next week. First support is now down at 78.47 to 78.70 in the May contract. First resistance is now at 81.84 to 82.00.
TODAY’S MARKET IDEAS: Traders should look to lighten up on long positions.
Tags: Cotton, Softs
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