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WEEKLY REPORT
by Alex Gansch -- Vice President
/ Senior Trader
May 26 - 30,
2003
Cotton prices were once again hit hard this
week by the hands of the speculators, who after the extended weekend in
the US, forced the CRB Index 224 points lower on Tuesday as a result of
their heavy sale orders in many of the soft commodities, notably cotton,
coffee and cocoa. Meanwhile, despite the beneficial rainfall in excess of
2 inches in certain areas in West Texas and Georgia over the weekend, the
crop progress still highlights the need for near perfect weather during
the remainder of the season for the US cotton crop to get close to the
current USDA production estimate. As of the reporting week ending May 25,
70 percent of the crop has been planted versus 57 percent the prior week,
79 percent compared to the same week this past year and the 4-year average
of 77 percent.
States that are still 15 percent or more behind their usual schedule are
Arkansas, Missouri and Tennessee. Meanwhile, demand is continuing its
lackluster pace as the weekly USDA export sales report revealed. For the
week ending May 22 new commitments increased by only 77,500 bales, 54
percent below the prior week and 56 percent less than the previous 4-week
average. Exports of 273,100 RB were 2 percent higher than the previous
week, but 6 percent under the prior 4-week average. The spec/hedge report
did not provide any new input for cotton either as speculators are
continuing to hold a rather insignificant net-short position for time
being of 4.2 percent of the open interest, which is up slightly from the
previous week. The National Cotton Council’s monthly consumption report
for April also did not bail out the remaining bulls in the market |
as U.S. textile mills, on a
seasonally-adjusted basis, were reported to use 7.10 million 480-pound
bales annually. This figure was lower than general market expectations had
predicted and forced the market low enough to hit sell stops, plunging the
market lower amid a lack of buyers.
The familiar cycle is continuing: cotton prices seem poised to test the
area below 50 cents again as most analysts predict at this stage, only to
generate increased demand from overseas customers, which ultimately will
lift prices higher again.
Little news emerged from the Pima market this past week, as weather
conditions are improving in California, permitting the young crop to play
catch up. Above normal temperatures continued to increase cumulative heat
units in the San Joaquin Valley and some producers began irrigating to
help reduce heat stress on plants with poor root systems. Most growers are
not yet ready to resume offering their 2003/2004 production, however,
another week or two of near perfect temperatures and it is generally
expected that new crop offers will reemerge. The interesting questions now
remaining are at what level will producers let go of their harvest, what
percentage will they sell at this stage and what impact will it have on
global demand. Moreover, analysts are also watching with great interest
the situation in Egypt, where the ultimate seize of the crop remains
subject of much speculation. Weekly export sales in the US registered an
additional 14,900 bales for the week ending May 22, bringing cumulative
commitments to 610,300 bales for the 2002/2003 season. Meanwhile new crop
sales increased by 2,400 bales to arrive at a seasonal total of 57,000
bales so far.
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