COTTON DIVISION

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

March 3 - 7, 2003

Cotton futures on the New York Cotton Exchange this week provided little excitement. The market drifted somewhat aimlessly throughout most of the week, remaining in its usual range. The known burden remains the excessive speculative net long position as well as readily available supplies despite robust sales. Market observers had been predicting a new record long position for the speculators of between 55 to 55.2 percent, up from 53.2 percent last week, yet the final number arrived at 51.7 percent net long of the open interest, covering however, a new record level of 60,886 lots gross long up from 58,119 lots the prior week. In other news the International Cotton Advisory Committee on Monday provided its monthly data for the market, estimating worldwide 2002/2003 cotton production at 87.1 million 480-pound bales, or 19 million tons, which is down 2.5 million tons, or 12 percent, from the record reached in 2001/2002 and makes for the smallest crop in five seasons. The ICAC pegged world cotton consumption at 95.6 million bales, or 20.8 million tons, marginally higher than the previous month, causing world-ending stocks to shrink to 8.5 million tons, the lowest in eight seasons. Meanwhile, mill buyers remain in a very active state, displaying a considerably higher buying pattern for this time of the year. Net Upland sale for the week ending February 27 reached 307,900 bales or 21 percent more than during the previous week and 34 percent over the 4-week average. Exports of 195,300 bales were equally strong,

week and only 6 percent under the 4-week average. Clearly, the US Dollar weakening to a 4-year low versus the Euro is of great benefit to American grown cotton at this time, however, current Upland sales are still about 1.2 million bales shy of the level reached at the same time last year.

Presently, there seems to be little else but the known and seasonal issues influencing the market and most analysts have been predicting the continuation of the range-bound trading between 55 and 60 cents. Nonetheless, we continue to believe with New York holding above its pivotal point of 57 cents any dips in cotton prices present a buying opportunity as the eventual longer term break out ought to occur to the upside.

The USDA on March 4 accepted bids on another 9,798 bales of 2001/2002 Pima cotton, bringing the cumulative total of forfeited Pima purchases via auction to an impressive 56,023 bales. The recent export data is certainly supporting such purchases as sales to overseas customers registered another 9,300 bales for the week ending February 27, pushing the seasonal total to 515,600 bales or less than 10,000 bales short of the USDA estimate for the present season. At the same time last year, the USDA had recorded total sales to overseas customers of 331,700 bales. Provided step-2 payments continue to linger at the current level of ard. 11-12 cents per pound, expectations are high that future sales organized by the USDA will be equally successful. The latest catalogue is inviting bids on yet another 10,416 bales of 2001/2002 Pima cotton of California origin. Meanwhile, new crop planting preparations are in full swing and weather permitting, some farmers may well decide to initiate a first round of plantings by mid month.

Prices for the new crop production have been hovering right ard. 90 cents for the base Grade 3, 1.7/16, premium micronaire description with a limited number of buyers yet considering coverage as shown by the official registrations to-date of 5,700 bales versus a modest 7,200 bales at the same time last year. Price development remains an educated guess at best, however,

considering recent events, excluding the thought of any significant problem caused by Mother Nature, prices ought to gradually appreciate as the new season gets under way especially as off-take of past and present production not just of US Pima continues at such stable pace.

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