Merchants have, to some degree, lowered their offering prices to mills. However, there remains only a slow volume of business being done. Again, mills want a break below 62 cents and mills-much like growers-want something that is not there. Mills want to pay two to three cents below the market price and growers want to receive two or three cents above the market price. However, time may be beginning to run short for mills.
The large imbalance of on call sales cash contracts (must be satisfied by buying futures to fix a price)is working closer and closer to a move toward higher prices. With call sales towering over call purchases (selling of futures to fix a cash price); the dynamics of the market could create considerable price volatility in the coming weeks.
Pakistan is making inquiries into the export market, suggesting the there week old discussion of a questionable crop out of there most likely has merit. However, the Indian crop continues to impress. India, accustomed to yields of 250 pounds per acre for decades, has seen its last three crops expand rapidly. Technology has raised the Indian yields and growers can routinely harvest 500 pounds per acre.
India is the future of cotton production. Their yields will plateau another 250 pounds higher to a yield of 750 pounds per acre. Additional, technology will move them yet higher. India is now well entrenched as the second largest cotton producer in the world, behind China, and well above the U.S. Accompanying this production increase has been the decision by China to look to India for it cotton import needs. This trend will continue as the U.S. further reduces cotton acreage in 2008.
The 62-67 cent trading range will hold, but the 2008 calendar year will bring higher prices as we move through the spring.
marketing@alchempro.com
