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WEEKLY REPORT June 21 - June 25, 2004 Cotton finally saw the long-awaited technical correction during the latter part of this week. While some analysts seem to detect a trend-change in cotton, we would prefer to call it a temporary adjustment and most likely a good selling opportunity. As the predominant crops worldwide seem to come along rather nicely with few exceptions and demand still suffers from a sluggish global economic recovery, one can only hint at the upcoming USDA acreage report, the Federal Reserve rate meeting here in the States as well as the end of the second quarter this coming week as a window of opportunity. Adequate precipitation in the US Southwest and a stable crop condition report kept values under pressure with 41 percent of the US crop reported as squaring versus 31 percent a year ago and the five-year average of 39 percent. Meanwhile, 7 percent of the crop was setting bolls compared with 6 percent last year and the five-year average of 7 percent as of June 20. The condition report evaluated 8 (21) percent of the US cotton crop as ”very poor/poor”, 26 (31) percent “fair” and 66 (48) percent as “good/excellent” (last year’s figure). Offsetting the positive crop development were the expectation that the USDA will cut US cotton acreage in its upcoming report noticeably from its March Planting Intentions of 14.40 mio acres. The average private estimate currently stands at 13.70 mio. acres as low cotton prices possibly influenced producers’ decision to switch out of cotton and into soybeans and corn. Last year’s acreage arrived at 13.483 mio acres. The report to be released at 8:30 a.m. on Wednesday of next week is based upon producers’ survey that took place during the first two weeks of June. Further support for prices arrived in form of the weekly spec/hedge report, which revealed that speculators had increased their net short position from last week’s 28 percent to 36.1 percent net short as of June 18. Should the speculators’ desire call them to |
cash in some of their profits prior to
the end of the second quarter, prices may well rise further. Weekly
export sales also came in slightly better than expected with commitments
rising by another 137,800 b/c for the present crop year, which was 16
percent above the previous week and 1 percent over the prior 4-week
average. Exports rose by 367,500 bales or 5 percent less than the week
earlier but 16 percent above the previous 4-week average. The US Census
Bureau was trying to match the positive tone of the export markets by
showing seasonally adjusted annual consumption of cotton in the US as of
the end of May stood at 6.23 million bales or just marginally less than
the 6.30 mio. bales predicted by the USDA to be consumed by the American
textile industry at the end of this season. The fact that 23,000 bales
were showing as decertified this past Friday provided a late boost to
values and the closing price for the December trading month finished up
just slightly on the week. Though the market performance during the second half of this past week finally breathed some life back into the bulls, caution is the word of choice here, especially with three important reports out for release in just a few days. Just like for the Upland crop, so has the focus for Pima enthusiast switched to the upcoming USDA acreage report. As there appear to be few worries about the young crop and as sales hum along, private speculations run wild of how much of an increase in acreage the USDA at this stage will feel comfortable with. Undoubtedly, the March 2004 prospective planting estimate of 226,600 acres for the entire US (CA: 200,000 – AZ:2,600 – NM: 8,000 – TX:16,000) will need to be revised upward, yet the extent thereof remains pure guesswork until next week Wednesday. Both the Supima Association as well as the Pink Bollworm Program will offer their estimate for the 2004/2005 Pima production by the end of July/early August of this year. Meanwhile, US export sales for the week ending June 17 increased by 9,900 bales to 519,700 b/c, sparked by the ever increasing step-2 subsidy, which for the coming week stands at 31.49 cents or in excess of $150 per bale. |
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New crop sales remain subdued with only 3,900 additional bales reported as sold to overseas destinations. The current tally for the 2004/2005 crop stands at 44,200 b/c compared with 61,400 b/c at the same time last year. |
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