2008 cotton plantings may fall to 9.5-9.7mn acre range
15 Dec '07
4 min read
For example, for many growers, the break even soybean yield is as low as ten bushels per acre. Thus the stage is being set for an aggressive planting/post planting price rally. With the 2009 crop now trading well above 80 cents, can prices rally into the 90 cent range if 2010 U.S. carryover falls to about 2.0 million bales? The one word answer is, yes! However, that price level in far from materializing.
Thus, for now let's control both our emotions and our economics and look at the winter/spring 2008 contract months. A planting/post planting rally expected in just a scant few months will also carry the old crop May and July (2008) contracts higher.
These contracts will find considerable pressure to push above 70 cents. However, the certificated stocks could be an issue that prevents such a rally. The March contract will also feel the rocket fuel slowly igniting under it. Yet, with certificated stocks between 500,000 and 600,000 bales that contract will almost certainly remain range bound through its expiry.
USDA's December world supply demand report offered few changes. World ending stocks for 2007-08 increased 480,000 bales and are now estimated at 55.29 million bales. It is this level of stocks that will keep the March contract well below 70 cents and could possibly prevent May futures from reaching above 68 cents.
World consumption was lowered 930,000 bales and is now estimated at 128.27 million bales. This drop was led by a decline in USDA estimate of consumption in Pakistan of 1.0 million bales, primarily due to the weather reduced crop in that country.
World production was lowered 600,000 bales, falling to 118.76 million bales as the Pakistani crop was lowered 1.25 million bales, down to 8.5 million bales. The U.S. crop was increased marginally and now is estimated at 19.0 million bales.
Again, March remains dead in the water. However the volatility in all other commodity markets will keep our market also very volatile. The trading range will hold, but new crop prices are in for a ride.
marketing@alchempro.com
