With Northern Hemisphere crops starting to move off the field, any potential shortage is not likely to be felt until later in the season. Therefore, unless the trade panics in reaction to a major crop problem that could still develop over the next six to eight weeks, it will be difficult for the market to run away to the upside anytime soon.
Instead the market will probably settle into a trading range, which as in previous years will be dictated by the AWP/Futures spread. While over the last couple of months US old crop cotton has been the price leader in the export market, mainly due to a lack of competing offers from other origins, this is likely to change once US old crop supplies run out.
The fact that nearly 200'000 bales of Certificated Stock were de-certified over the last two weeks seems to be an indication that there may not be a lot of desirable old crop cotton left.
Once US old crop is out of the picture, foreign growths, such as India and Pakistan, will likely emerge as price leaders, while US new crop cotton will once again be forced into the role of residual supplier.
marketing@alchempro.com
