While the market pulled back in early trading after the release of the USDA report, there continue to be signs of concern about the size of the U.S. crop. The price trend will remain higher.
The report confirmed the end of the marketing year flash that sent 2005-06 export to a record 17.6 million bales, some 550,000 bales above the July estimate.
That coupled with 2005-06 domestic consumption at 6.0 million bales, brought year ending carryover stocks down to 5.9 million bales.
While this is 400,000 bless more than the 2004-05 level of ending stocks, just six months ago the market was concerned that 2005-06 carryover would be 6.5 to 6.7 million bales.
Projecting 2006-07 U.S. exports at 16.2 million bales and domestic use at 5.5 million, USDA forecasts that July 31, 2007 carryover will drop to 4.7 million bales, a level that should allow New York to trade at the very low 60-cent level.
World production was raised 1.23 million bales and world carryover was increased 840,000 bales.
The primary production change was a one million bale increase in India, an increase expected by the market. There were only minor adjustments made for other countries.
The certificated stocks issue will continue as a massive sledge hammer looming over any attempt to take New York futures higher. However, as crop production estimates fall, as is expected, prices will continue to inch their way upward.
marketing@alchempro.com
