The New York December contract continues to drift upward toward the 63 cent mark, pulled primarily by the strength in the December 2008 futures contract. The door to export demand has all but been slammed shut with the December 2007 contract now above 62 cents.
Additionally, with the beginning of the harvest in the U.S. and China, prices are likely to come under pressure. Pressure will build further as the entire Northern Hemisphere approaches it peak harvest in the next 45 to 60 days. However, the current rally could carry to the 64 cent level before collapsing.
The nearby lows of 56-57 cents should be expected to hold. However, the strength of the December 2008 contract may keep New York from falling below 58 cents. The December 2008 contract, while likely to see some light downward pressure during the 2007 peak harvest, has little more than upward sailing in its future-possibly as high as the upper 70's.
Wheat, soybeans and corn are all dressed in full combat gear and fighting for 2008 acreage. While such commodity price ratios are cyclical, there is more demand for planted acreage that at any time in history. This is not only true for the United States, but globally. Oilseeds, food grains and feed grains will likely be favored over cotton.
USDA released its September supply demand report this week and increased its estimate of both the U.S. and the world crop. The U.S. crop is now estimated at 17.8 million bales, up 450,000 from last month's estimate. World production was raised 1.26 million bales and is now estimated at 117.2 million bales.
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