March 23, 2012

 

US cotton's high export volume lifts prices

 

 

US cotton's exceptional export data raised the prices of the fibre, and triggered ideas that history may be about to repeat itself, even as soy data failed, weakening its futures.

 

The US, the top cotton exporter, sold 284,000 running bales of cotton to foreign buyers in the week to last Thursday (Mar 22), with China the top destination.

 

Excluding the 359,000 running bales sold the week before, the figure was the highest since November, when Chinese purchases spiked as part of an inventory rebuild.

 

And it left sales ahead of the rate needed to meet USDA projection of American cotton exports hitting 11 million 480-pound bales in 2011-12.

 

"This morning's export sales and shipments were absolutely outstanding," Mike Stevens, the Louisiana-based cotton analyst, said, estimating that sales were running 7.8% ahead of the pace needed to match the USDA's estimate. "We need to average shipping 235,000 running bales per week to reach 11 million statistical bales."

 

Broker Keith Brown said, "It shows we are still shipping cotton," adding that the statistics tallied with market talk. "Everyone we speak to says cotton is flying out of the warehouse."

 

New York cotton for May closed 1.4% higher at 89.58 cents a pound.

 

"We are seeing some of the merchants buy back some of their short positions," Brown, president of Georgia-based Keith Brown & Co, told Agrimoney.com. Speculators have amassed significant short positions in cotton too.

 

While his central forecast remained that Thursday's price rise, which extended increases in the previous two sessions, was "just a rally in a bear market", he noted that the market's recent behaviour echoed that of spring 2012, which heralded a more sustained recovery.

 

Then the USDA too, as recently, lifted estimates for world inventories to ample levels, only for prices to rise by more than one-third in three months.

 

"We bottomed out then in similar circumstances," he said.

 

Cotton's rally contrasted with a drop of 0.4% to US$13.49 a bushel in Chicago's May soy contract, after the USDA data revealed the US had sold 533,000 tonnes of the oilseed, of 2011 crop and 2012's combined.

 

The figure, the second weakest in 2012, represented a fall of more than 62% week on week, and fell below market expectations of sales of, at worst, 900,000 tonnes.

 

"Soybean export sales were disappointing and that has prompted some selling," Darrell Holaday at Country Futures said.