The rains and floods in India, mentioned last week, have subsided and initial reports place the crop up to 350,000 bales lower.
The lag in U.S. export sales continues to be noticed only by those in the U.S. Weekly net sales of upland cotton were only 91,800 bales and shipments were 189,000 bales. While both are significantly below prior year numbers, they are well above their respective five year averages.
For now there is no real concern as cheaper West African and Brazilian cotton seem to be in the spotlight. Too, the release this week of the U.S. monthly domestic consumption report pegging July usage at an annualized level of 5.6 million bales was not unexpected.
Hopefully, the real news will turn out to be the emergence of mill demand building under the market, coupled with the realization that mill offering prices have increased for 50 to 100 points in the past few days.
Many mills, over the course of the next two months, can no longer wait for the market to come down to them. They must bid up to the market. No where is this clearer than in realizing that merchant asking pricing are beginning to move higher.
Thus, the demand side of the market is building support under prices. The December contract should be well supported at 54 cents, with only a slight possibility of slipping down to 53 cents.
With demanding building the real test will be whether December can break above 56 cents. I continue to like higher prices, given that production numbers are coming down.
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