New York cotton futures edged higher this week as mill demand for non U.S. growths increased significantly. This coupled with USDA's announcement that 2008 U.S. planted cotton acreage would drop to 10 million acres took the red December futures to its contract high and positioned the 2007 December to possibly move above 67-68 cents.
The reality that all field crops are in short supply, relative to demand, came center stage to the market this week. While a set back could occur, December cotton will trade higher.
Our comment last week that the current December futures price, 63-64 cents, could be the lowest price we will see for cotton for the next two to three years is looking more and more prophetic. While world carryover is above 55 million bales, the world stocks to use ratio remains at a fourteen year low. Yet, cotton prices are in no position to fight for increased acreage in 2008. Thus, U.S. and world stocks will move lower.
Both U.S. and world oilseed and grain prices have far outstretched the price increase in world cotton prices. The world agricultural commodity markets are all trading soybeans and wheat and those crops will command the bulk of acreage, possibly forcing U.S. cotton acreage even below the ten million acre level. Impossible it seems, but U.S. planted acreage could be in the single digits, even as low as 9.0 million acres.
Chinese mills were aggressive buyers this week, but not of U.S. growths. As stated several times over the past year, Chinese mills have had considerable success in spinning Indian cotton.
marketing@alchempro.com
