Over the last four sessions the market has attempted to rally from what seemed to be at least a temporary bottom around 51.50 cents, but every such breakout attempt ran into heavy resistance between 52.75 and 52.90 cents.
After getting rejected yet again this morning, the bulls finally stepped aside, which caused the market to break through recent support, closing just 21 points above the contract low of 51.20 cents.
With the October contract now in the notice period, its current price of 50.00 cents seems to make perfect sense. The last eight futures contracts all went off the board somewhere between 47.50 and 53.79 cents, with July'06 being the lowest of the pack and May'05 the highest.
The market has adhered to the same script for almost two years, whereby the spot month expired somewhere around 50.00 cents, only to be followed by the next month drifting towards that same level as well, and so on.
If the market were to continue in this pattern, then March at 55.06 or July at 57.30 look rather pricey.
At least for now there is nothing that suggests that a change to this pattern is in store. China is not expected to be a strong importer over the next few months in view of a larger than expected domestic crop, which may be as big as 29-30 million bales.
Therefore, the impending harvest in the Northern Hemisphere is likely put some pressure on a market that is not seeing more than its usual share of hand-to-mouth demand by mills. Barring any last minute crop disaster, the market is likely to remain subdued until the second half of the season, when the supply situation will get a lot tighter.
marketing@alchempro.com
