COTTON DIVISION

WEEKLY REPORT
by Alex Gansch -- Vice President / Senior Trader

January 20 - 23, 2004

Only a modest increase in cotton prices was noted throughout this past week. The market seems to be lacking clear direction and was primarily trading sideways with little in terms of fresh news, providing participants with no conviction to force prices higher or lower. The previous announcement from China National Bureau of Statistics, which stated estimated domestic output for 2003/2004 cotton would reach 22.36 million bales, or 4.87 million tons, was greeted with much skepticism. The estimate was down about 1 percent from 2002 and remained above the current USDA estimate of 22.0 million bales yet most private analysts are expecting a final crop figure of closer to 20.5 million bales. The ultimate proof may or may not come in form of additional purchases from China, which are still largely anticipated for the weeks following the current Lunar New Year festivities, ending on January 28. Further statistics from the National Bureau of Statistics said imports for the 2003/2004 season, including orders made on 2003, will be as high as 1.4 million tons. September through November last year accumulated a yarn output growth of 10.41 percent, compared to the year-ago level, however, yarn output is expected to drop

There is little news to report for US Pima this week. While ginning is about to be complete in most areas with final operation expected to end by the middle of February, growers are focusing on field preparation, assuring adequate subsoil moisture and weed control. Arizona enjoyed a welcome round of precipitation this week, while temperatures in California remained at a seasonal 50-60 degrees Fahrenheit. Meanwhile, export sales have been very modest wit only 1,800 bales reported as new sales for the week ending January 15. Total commitments stand at 414,600 bales of which 343,800 b/c have

been shipped compared to last season’s 436,000 bales sold around 6 percent, implying a national cotton consumption of 6.77 million tons. The 2003/2004 ending stock level, based on possibly bigger increases in imports, is estimated at 1.07 million tons with a stock-to-use ratio of 16 percent. In other news, the spec/hedge report from the New York Board of Trade, released on Wednesday morning, showed that the speculative long position remained unchanged compared to last week at 42.1 percent. The weekly USDA export report showed net Upland sales of 166,000 bales were up 23 percent from the previous week and the prior 4-week average. Exports of 354,600 b/c, however, represented a marketing-year high, 21 percent above the prior week and 76 percent over the prior 4-week average. China was once again the major destination.

The market seems to be trying to break through 76.10 in the spot month, yet despite repeated attempts, it has yet to capture this target. Further resistance is expected above this level and short of any major news, it will be difficult for prices to reach what most observers consider as realistic, the 80 cents area. Good-seized fresh export sales will have to be reported in the coming weeks to support a move higher and all eyes are once again directed at China, which may send a cotton buying delegation to the US by mid February, when its wheat buyers are expected to complete further purchases in the States.

There is little news to report for US Pima this week. While ginning is about to be complete in most areas with final operation expected to end by the middle of February, growers are focusing on field preparation, assuring adequate subsoil moisture and weed control. Arizona enjoyed a welcome round of precipitation this week, while temperatures in California remained at a seasonal 50-60 degrees Fahrenheit. Meanwhile, export sales have been very modest wit only 1,800 bales reported as new sales for the week ending January 15. Total commitments stand at 414,600 bales of which 343,800 b/c have

been shipped compared to last season’s 436,000 bales sold and 235,000 bales shipped. Nonetheless, prices in the US interior as quoted by the USDA have increased this week on average 3.00 cents/pound, yet without the availability of the US ELS subsidy, fresh sales for high grades remaining in the US are somewhat difficult to come by at current asking rates. As there are still some stocks expected to remain unsold at this stage, primarily overseas, the expectation is that these

stocks need to be sold first before Pima prices could possibly appreciate further. Dampening those expectations, however, are the current fine-count yarn prices, which have been very slow in following the raw material value.

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