Cotton futures below 56c for March inspite of China & India purchases
11 Dec '06
3 min read
Cotton prices were under pressure all week as demand continues to be the primary problem facing the market. World consumption, especially in China and India, remains exceptional and on a very steep demand curve.
In the past this was all that was needed to boost New York futures. Yet, with these two countries rapidly expanding yields and production, the demand for U.S. crop has gone lagging during the Northern Hemisphere harvest season.
All bets for higher prices remain placed on the expectation that China will open its import doors very soon. Yet, for now it is difficult to see the March contract trading above the 55 cent level. The market should remain in a narrow three to four cent range into the beginning of the New Year.
Historically, we see a rally in very early January and it should still be expected. Yet, if March is in the 51-52 cent range, a three to four cent rally would still fall short of 56 cents.
The December certificated stocks delivery period ended with nothing more than a whimper as the stocks were the cheapest available supply in a market that has no real buyers for U.S. physical cotton.
The large volume of old crop cotton that could be recertificated will likely move to the export market because of the age penalties it would encounter if recertificated. While this is positive for the market, there is developing pressure to certify a large volume of the current harvest. This could continue to keep prices under considerable pressure.
marketing@alchempro.com
