The U.S. and world cotton supply/demand outlook remains framed by the November 9 USDA World Agricultural Supply/Demand Estimates (WASDE) report which forecasted tighter world stocks, but ample U.S. supplies -- projected U.S. average yield and production were 798 lbs/acre and 21.3 million bales, respectively.
The WASDE report also increased USDA's estimates of U.S. exports to 16.2 million statistical bales based on the relatively low foreign stocks-to-use (excluding China).
The change in U.S. stocks-to-use from year to year generally moves in the opposite direction of U.S. prices.
The USDA numbers for the foreign and world situation still project a decrease in 2006/07 world stocks-to-use, but only by around 4 percent down to 43.2 percent.
Historically, such a move implies only mild support for the A-index of world prices.This suggests a decreased chance of seeing the A-index reach the 66-67 cent level where the LDP begins to erode in value.
The supply/demand implications for price outlook can be seen in this seasonal average price chart, where December futures in stable years tend to weaken during the late October-December harvest period.
marketing@alchempro.com
