Cotton Experts announces that the cotton moved higher on the week as US crop conditions deteriorated further, exports shot higher and certificated stocks moved lower for the second consecutive week.
The potential for higher prices surfaced in late winter when it became apparent that West Texas had little to no subsoil moisture and long range weather models called for the Texas problems to spread east throughout the cotton belt.
Cotton Experts even made point on weather conditions, which is actually deteriorated more than had been expected and, coupled with stronger than forecast U.S. exports, both U.S. and world carryover stocks have been reduced beyond expectations.
These factors, taken together with certificated stocks showing a tendency to decline, the technical picture brightened and speculative funds have been consistent buyers, pushing the market higher. Further market advancement waits the August 11 (Friday) USDA World Cotton Supply Demand Report. Yet, the weather meltdown for cotton will carry prices higher during the year.
The smaller U.S. crop will result in a reduced world production and a reduction in U.S. exports. USDA's current U.S. export estimate for 2006-07 is 16.6 million bales, about one million below what the final tally for U.S. exports will be for 2005-06.
However, given the drastic decline in the U.S. crop, exports will likely fall within the 15.5 to 16.1 million bale range. The U.S. will experience a significant drop in carryover stocks during the current year. This will add support to the market throughout the year.
marketing@alchempro.com
