The cotton market continues to do little more that march in step; remaining tightly locked in a three cent trading range between 63 and 66 cents. The dominant trading range actually stretches from 62 to 67 cents, but recent activity has been confined to the tighter three cent range.
Friday's release of the USDA November supply demand report, while mildly bullish, did not appear to be noticed as USDA's changes were expected. Look for December futures to continue in their current trading range through its expiry. Nevertheless, with open interest seeming to reach a new record level each new week, considerable volatility should not be surprising.
Major changes in USDA's world cotton supply demand estimates for were mostly in Chinese, Indian and U.S. estimates, that is the three largest producing countries and two of the largest consuming countries. However, Pakistani production was decreased and imports along with consumption were increased.
The U.S. crop was increased 710,000 bales and is now estimated at 18.7 million bales. While domestic consumption was unchanged at 4.6 million bales, U.S. exports were reduced 500,000 bales, falling to 16.2 million. U.S ending stocks were increased 1.2 million bales, climbing to 7.6 million.
The U.S. numbers will, without question, be the cornerstone of the argument the bears will sling around demanding lower prices. To their credit, it is most unusual to see U.S. production increased and U.S. exports decreased in the same report. Further, I do not recall a monthly report ever pointing to a significant production increase and a significant export decrease in the same month. The report was unprecedented.
marketing@alchempro.com
