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The market may continue to run out of sellers on breaks as we approach harvest and crop conditions remain under mild, ongoing pressure. This is true because a substantial percentage of the crop may already be hedged and importers keep buying despite higher prices. Temperatures remain warm across major growing regions of the southern US. Scattered areas of over 100 degrees should remain in Texas today with a larger area of 100s starting to reform there by tomorrow and expanding into southern Oklahoma. Scattered showers and thunderstorms are expected from Texas to the Southeast, although they will not be a major factor outside the Delta, Mississippi and Alabama. Rains may persist up to 5 days in the SE, but all of this should come with continued above normal temperatures that may last through the end of next week. The USDA will issue its latest Export Sales report this morning and traders are expecting a figure below last week’s strong total of 341,800 bales. However, the total is expected to be above the average of 163,600 bales that is needed each week to reach the USDA’s current export forecast for 2010/11. The pace of exports so far stands at a brisk 39.8% of the USDA’s projection versus the 5-year average of 21.8%. In yesterday’s action, December cotton sold off to start the day session and remained moderately lower for the rest of the day. Private crop forecasters in China indicated yesterday that the important cotton producing province of Xinjiang in NW China should produce a bumper crop this year, although one that may be delayed by about two weeks. This follows Tuesday’s reports from India that they may increase cotton exports by as much as 5 million bales from previous expectations of 3 million. Stocks registered for delivery against the ICE contract remained unchanged for the second day in a row yesterday at 19,394 bales. Open interest in cotton continues to rise, up by another 1,976 contracts on Tuesday to its highest level since September, 2008.
TODAY’S GUIDANCE: The dual rise of open interest and prices just ahead of a big harvest would be troubling in most years, but the very strong pace of export demand is the reason for the rally in the first place and recent Export Sales reports have indicated that buyers are not afraid to keep booking as prices go up. India’s increased exports could also put a damper on the market, but they may not export as much as 8 million bales when all is said and done, especially if inflation accelerates in the domestic apparel market. The expansion of middle classes in Asia translates into increased demand for clothing, and this will likely occur at much the same rate in Asia whether China’s economy expands at an 8% or an 11% rate over the coming year. First support in the December contract is above 81.78. First significant resistance is at 85.71.
Cotton Market Commentary – 2010.08.19
by Terry Roggensack on August 19, 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 market may continue to run out of sellers on breaks as we approach harvest and crop conditions remain under mild, ongoing pressure. This is true because a substantial percentage of the crop may already be hedged and importers keep buying despite higher prices. Temperatures remain warm across major growing regions of the southern US. Scattered areas of over 100 degrees should remain in Texas today with a larger area of 100s starting to reform there by tomorrow and expanding into southern Oklahoma. Scattered showers and thunderstorms are expected from Texas to the Southeast, although they will not be a major factor outside the Delta, Mississippi and Alabama. Rains may persist up to 5 days in the SE, but all of this should come with continued above normal temperatures that may last through the end of next week. The USDA will issue its latest Export Sales report this morning and traders are expecting a figure below last week’s strong total of 341,800 bales. However, the total is expected to be above the average of 163,600 bales that is needed each week to reach the USDA’s current export forecast for 2010/11. The pace of exports so far stands at a brisk 39.8% of the USDA’s projection versus the 5-year average of 21.8%. In yesterday’s action, December cotton sold off to start the day session and remained moderately lower for the rest of the day. Private crop forecasters in China indicated yesterday that the important cotton producing province of Xinjiang in NW China should produce a bumper crop this year, although one that may be delayed by about two weeks. This follows Tuesday’s reports from India that they may increase cotton exports by as much as 5 million bales from previous expectations of 3 million. Stocks registered for delivery against the ICE contract remained unchanged for the second day in a row yesterday at 19,394 bales. Open interest in cotton continues to rise, up by another 1,976 contracts on Tuesday to its highest level since September, 2008.
TODAY’S GUIDANCE: The dual rise of open interest and prices just ahead of a big harvest would be troubling in most years, but the very strong pace of export demand is the reason for the rally in the first place and recent Export Sales reports have indicated that buyers are not afraid to keep booking as prices go up. India’s increased exports could also put a damper on the market, but they may not export as much as 8 million bales when all is said and done, especially if inflation accelerates in the domestic apparel market. The expansion of middle classes in Asia translates into increased demand for clothing, and this will likely occur at much the same rate in Asia whether China’s economy expands at an 8% or an 11% rate over the coming year. First support in the December contract is above 81.78. First significant resistance is at 85.71.
Tags: Cotton, Softs
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