NY futures recovered this week, as March gained 103 points to close at 64.81 cents, while December'08 added 90 points to close at 72.50 cents.
The cotton market traded without much authority this week and instead followed the lead of competing crops, as corn, soybeans and wheat all posted new contract highs.
The mood among cotton traders remains subdued, since demand has slackened off again after last week's flurry of activity, which led to export sales of 367'300 running bales.
The latest USDA report was received with a big yawn by the market, as just 13'500 futures traded on the day of the report. One number that stood out though was the 0.98 mio bales reduction in world consumption to 128.27 mio bales.
Even though this reduction was entirely due to an adjustment in Pakistan's figures, we believe that there is growing concern that consumption could be scaled back further in the months ahead.
We have long held the believe that the USDA consumption number is overstated and feel that consumption is probably no more than 122 mio bales and possibly as low as 120 mio bales. However, even if that were the case, it would still be bigger than production this year and we therefore feel that the current pessimism in trade circles is a bit overdone.
When we take a step back and look at the trends in production and consumption over the last five seasons, we notice that production took a quantum leap in the 2004/05 season, when it jumped by an astonishing 26.8 mio bales to 122.2 mio bales. In the three seasons that followed we have seen a leveling off, but production was still able to stay near this record level, producing crops of 117.7, 122.1 and 118.8 mio bales.
marketing@alchempro.com
