Second, the heavy rains in Syria, Greece and Turkey have decimated available high grade supplies in these origins, which means that the former two may disappear from the A-Index in the not too distant future.
Spain's remaining high grades will sell out fast given the quality problems in the region, and as a result of this thinning out in the A-Index we could see both the US Memphis and California/Arizona quotes become permanent fixtures of the calculation.
While there is no reason to expect prices to go any lower due to the tight AWP/Futures spread, there is also no reason to believe that prices will explode to the upside anytime soon in view of this huge, unsold supply in the US.
Since the technical picture has been improving lately there is still a chance that a short-covering rally may get triggered one of these days, which would provide merchants with an opportunity to lock in a workable AWP/Futures spread.
However, the large certificated stock and the eagerness by merchants to sell into any bounce have so far kept a firm lid on the market.
Based on the statistical situation, there is no doubt that most of this US cotton will be needed sooner or later, but the way things look at the moment it may be quite a bit later. In the meantime, we expect the market to trade in a relatively tight range with perhaps a slight bias to the upside due to a well-supported A-Index.
marketing@alchempro.com
