Cotton prices continued their upward path this week as ideas of weather related crop setbacks surfaced in China, the U.S. and India. With the big three possibly seeing smaller than expected crops, the already exuberant speculative funds continued to push the market higher.
Yet, it appears that prices have left most of the business behind. While mills do need to finish their fourth quarter buying, export sales slowed as prices escalated.
Longer term--in 2008--the market will move higher, but for now the December 2007 New York futures contract, racing above 66 cents this week, needs a setback to at least the 62-63 cent level Unless weather problems do prevail, the December 2007 contract could still back down to 60 cents.
Speculative funds continue to be drawn to cotton due a number of factors. The long term demand for cotton is bright. However, the outside markets, i.e., most all of the other commodity markets continue to go up-up-up. Cotton is being pulled higher by the grain and oilseed markets.
Additionally, the financial markets support cotton prices since the U.S. dollar continues to devaluate against other currencies, thus making U.S. cotton exports that much less expensive in local currencies. Further, many of the metals markets, as well as the crude oil complex, seem to race higher and higher prices.
The past two years had experienced proclamations of higher cotton prices. Cotton's time has come. Cotton prices are ten to fifteen percent higher than year ago levels at most locations.
marketing@alchempro.com
