COTTON DIVISION

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

January 27 - 31, 2003

The market provided for little excitement this week as prices trended gradually higher. Speculative buying coupled with continuously strong export sales helped stimulate prices further. Bullish activity in the options ring, initiated among others by a major Memphis merchant, pushed futures higher as the market was seeking further direction from the usual weekly reports. In Tuesday morning's speculative/hedge report, market participants anticipated a 3 to 6 percent decline in the speculative net long position and were pleasantly surprised when the published figure showed 37.3 percent for the open interest as of January 24 or down 7 percent from the prior report. The weekly USDA export report was similarly helpful as new sales for the season registered net upland sales of 254,400 running bales, which was 35 percent above the previous week and the prior 4-week average. The major buyers were Turkey, China, Mexico, Brazil, Thailand and Japan. China's sales were said to be ahead of the start of their New Year holiday. Exports of 219,200 bales were another 32 percent above the previous week and 10 percent over the 4-week average, both categories surpassing private estimates for this week. The National Cotton Council finished the week off with its equally supportive report of seasonally adjusted annual cotton consumption at US textile mills of 7.88 million 480-pound bales in December. This figure was slightly higher than expected and 430,000 bales above the level of consumption at the same time last year. The NCC also upwardly revised the November 2002 estimate to 7.7 million from the previous 7.56 million bales.
While the market seems contend to remain within its trading range of 45 to 55 cents for the spot month, there can be little doubt that the trade community appears to be ready
 

US Pima sales are on their way to meet this season’s USDA target of 525,000 bales. For the week ending January 23, 5,300 bales were registered for export sales, pushing the cumulative total to 441,200 bales, which is 100,000 bales above the sale’s level at the same time last year. Expectation remains strong that sales in the coming weeks will maintain their pace as the USDA is publishing one catalogue after another. While the first official sale event showed a bid-average in the low 80-cent range, which was of little surprise given the level of strong sales in past weeks coupled with still a strong step-2 payment, forthcoming sales are expected to register lower bid prices and subsequently lower step-2 payments as the USDA will utilize the actual sale prices of its inventory to calculate its daily spot quotation, which is part of the step-2 analysis. Meanwhile, growers were mostly occupied leveling fields, initiating soil fumigation, applying herbicide treatments and planting bed preparation as their work for the coming season has already commenced. Ginning is expected to last probably another 3 weeks in most locations of the San Joaquin Valley before the operation will be shut down for the season.

• Previous Report