NY futures rallied this week, with March advancing 133 points to close at 53.45 cents, while December '07 rallied 153 points to close at 59.18 cents.
Just when the market seemed to stall out again, traders were treated to some constructive news this morning that gave the market a much-needed shot in the arm. First there was the US export sales report, which showed that over 501'000 running bales of Upland cotton and 7'400 bales of Pima found a home last week, which was about twice as much as estimated.
The second piece of news involved the A-Index, which saw the Syrian quote disappear and now includes California/Arizona as one of the five cheapest growths. This switch caused the A-Index to gain 20 points today instead of losing around 30- 35 points. For the week, the AWP advanced almost a cent, climbing from 42.11 to 43.09 cents, with the daily value measuring 43.45 cents before today's rally.
This pronounced move in the AWP gave buyers the courage to buy the market on the opening, while sellers initially backed off. This led to a steady advance in the early going and eventually triggered some decent spec short covering, which the trade used as a selling opportunity to lock in a workable AWP/Futures spread. Volume was active at 26'500 futures and over 8'000 puts and calls each.
Today's AWP/NY March spread reached as much as 1159 points (1134 on the close), which was the highest level since the beginning of September, when current crop cotton started to move into the loan. This unexpected rally may have helped to free up a sizeable amount of loan cotton, because the 42.11 cents AWP is still valid until midnight tonight.
With the daily AWP value expected to increase to around 44.00 cents tomorrow, it is likely that merchants will redeem cotton beyond what's needed to meet existing commitments. The resulting outright long or basis long position should help to alleviate the acute shortage of US cash cotton and increase its competitiveness in overseas markets.
marketing@alchempro.com
