NY futures continued to push higher, with December advancing 180 points to close at 66.67 cents and December'08 gaining 107 points to close at 74.57 cents.
It was more of the same this week, as speculators continued to buy the cotton market based on its strong technical performance, runaway grain prices and a weak US dollar. The grain markets are probably the strongest factor in this mix, as they are displaying never before seen strength in forward pricing, with December'08 wheat now at 6.78 dollars a bushel and November'08 soybeans closing today at 9.74 dollars a bushel. Even corn has made another charge as of late, with its forward December contract currently paying 4.24 dollars a bushel.
While it is not unusual to get these kinds of price spikes in cash or nearby contracts, it is unprecedented to see forward grain prices at such elevated levels this early in the game. Just to put this into perspective, the forward wheat contract is 44% higher than a year ago, while November'08 soybeans are 61% above last year's level and December'08 corn is currently 43% higher.
Cotton on the other hand is struggling to keep pace with its acreage competitors, as the forward December contract at 74.57 cents is up by just 25% compared to last year. We further need to remember that last year's grain prices were already substantially above their 20-year average, while cotton prices were depressed in terms of their long-term average. In other words, instead of narrowing an already sizeable price gap to grains, cotton has lost even further ground this season.
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