With little exception the market has been down the past ten days. While the support at 53 cent did not specifically hold, the market has been well supported near 52.50 cents.
This should continue as the USDA's September supply demand report was friendly to higher prices. I had been somewhat optimistic that the market would challenge 57 cents, basis December-with an excellent chance to move beyond that.
Yet, assuming only limited changes in supply/demand over the coming months; the market may not see any appreciable upturn until the January time period. However, the market typically rallies in very late December/early January, plus the announcement-when it comes-of Chinese import quotas will give momentum to the market.
The market uncovered excellent support and solid U.S. export sales and mill buying when December moved below 54 cents. This verified our suggestion that there are sizeable purchases for U.S. exports anytime the New York December contract falls below 54 cents. The closer to 53 cents the volume of sales increases.
The decision by textile mills not to chase New York above 55 cents has proven to be correct. With the peak harvest season in the Northern Hemisphere just two months away, mills will likely not see the need to chase the market, but rather they will attempt to let it come down (or stay down) to the 53-54 cent level.
Yet, should there be changes on the supply side of the price equation, New York will have the ability to challenge the 57 cent area. However, such a challenge, should it occur, would not likely come before mid October to mid November.
marketing@alchempro.com
