NY futures went through a steep correction since our last report on July 12, with December losing 434 points over the last two weeks to close today at 62.79 cents.
After a 17 cents run-up without much of a breather, the market finally underwent a sharp correction last week, during which it gave back about a third of its gains and it has since traded without much conviction in what appears to be typical summer doldrums.
Trading has been rather listless this week with the average daily volume dropping considerably, as the market awaits further input on the global supply and demand situation.
On August 10 the USDA will release its first detailed crop estimate for the US crop and recent field reports indicate that this number may come in higher than generally expected.
Yield potential in the Mid-South and Southeast looks promising and thanks to the plentiful moisture in Texas it is conceivable that the size of the US crop could approach 18.5 mio bales, although in the case of Texas an "Indian summer" is necessary for this late crop to reach its potential.
As we have pointed out in our last letter, it is quite likely that the US will have at least as much supply as last year's 27.6 mio bales. With US mills consuming only 4.4 mio bales next season, importers such as China and Turkey will again have over 23 mio bales of US cotton to choose from.
Nevertheless, if current USDA statistics are correct, it would still not be enough to bridge the projected foreign production gap of 24.5 mio bales.
marketing@alchempro.com
