In fact, a climb to 60 cents, even it was to come, would most likely surface only in the May or July contract. Each of the rallies will likely see slippage after the initial rise.
Too, any rally will be weak until, and unless, the Chinese become more aggressive buyers of U.S. cotton. Yet, while New York is about 54 cents today, the market could well slip back closer to 50 cents before a rally begins.
Export sales of upland cotton for the week ending 11-23-06 totaled a much needed 501,000 bales, with Mexico accounting for more than half of the sales at 263,100 bales and Turkey buying 114,200 bales. China was a distant third with only 26,900 bales.
Annualized domestic consumption for October fell to 5.1 million bales and the revised September estimate was lowered to 5.2 million bales. Annual usage for 2006-07 is on its way to falling below 5.0 million bales, likely coming in at 4.8 to 4.9 million bales.
With U.S. plantings falling some 500,000 to 700,000 acres during 2007, a pre-plant rally needed to "buy" additional acres for cotton is a must. The market will gradually trend higher now, but will remain in a tug-of-war.
The July calls, two or three cents out of the money, are attractive, as are the December calls.
marketing@alchempro.com
