The 'stuck in the mud' market suggested last week prevailed throughout the week. With USDA set to release its August supply demand report next Friday, August 10, the coming week will likely be slow early in the week followed by a bit of position trading a day or two before the release date. Look for the market to trade the 63.50 to 65.50 cent range into the report.
The USDA report will be closely watched as it will provide the results of the year's first objective field survey of potential yield and production for the U.S. The current USDA estimate of 2007 production is 17.5 million bales. However, all estimates to date have been totally subjective. Various estimates of the current U.S. crop range from 17.5 to 18.5 million bales.
Look for the estimate to be 18.1 million bales or larger. A crop this large will push 2007-08 U.S. carryover stocks to 6.5 million bales or more specifically, a sizeable increase from USDA's current estimate, about three million bales below the current estimate.
The foundation of any bull market lies in demand. As long as demand rises to meet any price advance, a market will maintain its ability move higher. Demand has tended to hold its own over the past two month price rise. Additionally some mills have paid higher for cotton with the price increase. However, most have been slow to take up additional supplies. Yet, it is becoming clear that a solid base of demand exists on any price pullback to 63.50.
marketing@alchempro.com
