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The market signaled earlier this week that there were not enough sellers available to turn the trend lower. The question now becomes whether there are enough fresh buyers to take out the early August highs and resume the longer term uptrend. Over the short term, that may not be possible due to the overall negative tone in commodity and equity markets and some indications of an improved world supply situation ahead. But over the intermediate to longer term, a move to near 90.57 in the December contract is within reach based on continued export demand. An industry association in Australia, Cotton Australia, projected today that this year’s 2010/11 cotton crop will be up 70% from last year to 2.7 million bales with an official from that organization saying that a push over 3 million bales is possible. (It is now late winter in Australia.) In addition, India stands ready to more than compensate for lost production in neighboring Pakistan by sharply increasing its own cotton exports this year. The UN Foreign Agriculture Organization estimates that 3.2 million hectares of cropland were damaged in Pakistan during the recent flooding with the hardest hit crop likely to be rice. Cotton losses have still not been determined, but it seems likely that they will fall well short of the 2.0 million bales that some were projecting 1-2 weeks ago. Today’s Export Sales report will be a short term indicator of the urgency of world demand at current price levels. Traders are expecting sales to be at least 100,000 bales below last week’s strong total of 447,400 bales but sales are expected to remain well above the average of 168,000 bales that are needed each week to reach the USDA’s current export forecast for the 2010/11 crop marketing year. In yesterday’s action, December cotton took out the previous day’s high for the third day in a row. This came despite more weak economic news with new home sales falling to their lowest level since records have been kept and orders for durable goods rose by less than expected. Cooler and dry weather is expected in major growing areas of the south for the remainder of the week. In fact, below normal temperatures are expected in most of Texas, the Delta and the Deep South today with well below normal temperatures possible in the Texas Panhandle and northern Delta. Stocks registered for delivery against the ICE contract remained unchanged yesterday at 18,783 bales.
TODAY’S GUIDANCE: The market may key off export sales and the dollar into the end of the week. A strong total of 300,000 bales or more on today’s weekly report could push the December contract to a temporary new high. However, a total of 200-250,000 would tend to reinforce the status quo and a much weaker number might bring a test of the 83.50 level. First support in the December cotton contract remains near 84.09 to 84.14 with next support at 83.55. First resistance remains at 85.71.
Cotton Market Commentary – 2010.08.26
by Terry Roggensack on August 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 market signaled earlier this week that there were not enough sellers available to turn the trend lower. The question now becomes whether there are enough fresh buyers to take out the early August highs and resume the longer term uptrend. Over the short term, that may not be possible due to the overall negative tone in commodity and equity markets and some indications of an improved world supply situation ahead. But over the intermediate to longer term, a move to near 90.57 in the December contract is within reach based on continued export demand. An industry association in Australia, Cotton Australia, projected today that this year’s 2010/11 cotton crop will be up 70% from last year to 2.7 million bales with an official from that organization saying that a push over 3 million bales is possible. (It is now late winter in Australia.) In addition, India stands ready to more than compensate for lost production in neighboring Pakistan by sharply increasing its own cotton exports this year. The UN Foreign Agriculture Organization estimates that 3.2 million hectares of cropland were damaged in Pakistan during the recent flooding with the hardest hit crop likely to be rice. Cotton losses have still not been determined, but it seems likely that they will fall well short of the 2.0 million bales that some were projecting 1-2 weeks ago. Today’s Export Sales report will be a short term indicator of the urgency of world demand at current price levels. Traders are expecting sales to be at least 100,000 bales below last week’s strong total of 447,400 bales but sales are expected to remain well above the average of 168,000 bales that are needed each week to reach the USDA’s current export forecast for the 2010/11 crop marketing year. In yesterday’s action, December cotton took out the previous day’s high for the third day in a row. This came despite more weak economic news with new home sales falling to their lowest level since records have been kept and orders for durable goods rose by less than expected. Cooler and dry weather is expected in major growing areas of the south for the remainder of the week. In fact, below normal temperatures are expected in most of Texas, the Delta and the Deep South today with well below normal temperatures possible in the Texas Panhandle and northern Delta. Stocks registered for delivery against the ICE contract remained unchanged yesterday at 18,783 bales.
TODAY’S GUIDANCE: The market may key off export sales and the dollar into the end of the week. A strong total of 300,000 bales or more on today’s weekly report could push the December contract to a temporary new high. However, a total of 200-250,000 would tend to reinforce the status quo and a much weaker number might bring a test of the 83.50 level. First support in the December cotton contract remains near 84.09 to 84.14 with next support at 83.55. First resistance remains at 85.71.
Tags: Cotton, Softs
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