The AWP/Futures spread continued to narrow and measured just 534 points against December and 886 points against March as of today's close.
During the corresponding week last year, these spreads stood at 810 points (December) and 1142 points (March), and on top of that US shippers had the help of a 288 points Step-2 payment.
It is therefore no surprise that US current crop cotton is not leaving the loan. As of Tuesday, only about 750'000 statistical bales have been freed from the loan so far, with around 7.3 mio statistical bales sitting in the loan (0.4 mio old crop/6.9 mio current crop).
This number will grow substantially over the next few weeks, as the balance of this 20.5-mio bales upland crop is being ginned and classed.
Even though US export sales have been fairly decent in recent weeks (167'700 running bales of upland and 9'700 bales of Pima), we need to remember that most of these sales are consisting of old crop cotton. When we look at the statistical picture, we find that there is not that much left for sale outside the loan.
On August 1, US beginning stocks amounted to 6.05 mio bales, to which we have to add 0.75 mio bales of current crop cotton that has so far been freed from the loan.
This gives us 6.8 mio statistical bales, from which we have to subtract 1.9 mio bales that have already been exported and about 1.8 mio bales that have been used by domestic mills.
This leaves about 3.1 mio bales,of which 0.8 mio are in the certificated stock and 0.4 mio are old crop loan stocks. In other words, the inventory that is currently carried outside the loan/cert.stock amounts to less than 2.0 million bales, plus the consignments in China.
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