NY cotton futures end slightly lower this week

28 Jul '12

7 min read

So where do we go from here? Due to the fact that China is running its own market at a much higher price level and is shouldering a large amount of the world’s ending stocks, we feel that the situation in the rest of the world is not nearly as bearish as it is generally perceived.

Yes, there is plenty of cotton to go around for some time to come, but we don’t see any of the major origins pressuring values at the moment. Prices in some of the traditionally cheaper origins seem to be well supported for various reasons. Pakistan and India are benefitting from Chinese yarn imports, while Brazil and Argentina are looking at a big acreage shift to soybeans going forward.

The US is basically sold out until new crop and Central Asian origins and Australia are not dumping their prices. Apart from pending issues with high priced contracts, mills seem to be operating with profitable margins at current levels.

In the near term we don’t see any reason for prices to break out of their 65-75 cents trading range, but given the huge price disparity that exists between cotton and food crops, we feel that the market may firm up somewhat once we approach the Southern Hemisphere planting window.

Plexus Cotton Limited

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