Cotton export from US continues to be unsatisfactory
26 Oct '06
2 min read
The Cotton December contract has managed to poke its head above 50usc giving a bit of breathing space for the bears. There was nothing really driving this minor rally.
Export sales from the US were once again insignificant, with Turkey leading the charge and China importing less than half of this amount – only 26,600 bales of cotton.
For the significant amount of unfixed cotton on December futures contracts, the reprieve, if you can call it that, provided an opportunity to price out bales at the $330 mark.
With the continued weakness in US export sales, an unprecedented and burdensome certificated stock level and an apparent absence of Chinese demand, December futures could well retreat further than where they are at present.
Redemption rallies that are required to relinquish cotton from the US loan programme, will not be a feature until US cotton is actually required and that is not until next year. There is plenty of other cotton to satiate Chinese demand in the interim.
On a positive note, the recent drought market has stimulated a ginning-for-seed frenzy with reports of up to $60 credits paid for growers who commit their ginning to a specific operator.
This is understandable, given the intense competition for cotton to process through expensive ginning facilities. The likely crop size will leave an average of 30,000 bales per gin; a very small pool for ginners.
Growers therefore have the opportunity to potentially receive well over A$400 for next season's cotton. This makes the sorghum/ cotton choice a close call.
marketing@alchempro.com
