Cotton Experts announces that Cotton futures surged higher this week as a number of factors were a bit friendly to the market. The inability of New York December futures to fall below 50 cents last week, as predicted by a number of analysts, coupled with more aggressive speculative buying, brought out some trade buying instead of just trade selling.
Additionally, a reduction of certificated stocks, albeit small, added a psychological boost as the technical charts turned slightly positive. By week's end, both the export report and the monthly domestic consumption report were friendly, supporting a slightly bullish view to the market. Too, weather concerns in the U.S. and across the Northern Hemisphere have become even more alarming.
Weather concerns initially gave a small boost to the market. This price advance, the first in weeks, provided a more attractive technical picture and encouraged fund buying. Since nearly 90 percent of all New York trading is done by the major cotton merchants and fund traders, the volume of money coming to the market from speculative funds all but dictates the direction of futures. Too, while merchants have remained scale up sellers during this rally, they were not as eager to sell this rally down.
The monthly domestic consumption report revealed that in June, U.S. textile mills used cotton at an annualized rate of 5.8 million bales, some 400,000 bales more than had been earlier forecast. That rate of monthly use surprised the market and will likely validate the USDA estimate of 2005-06 domestic consumption.
marketing@alchempro.com
