COTTON DIVISION

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

September 30 – October 4, 2002

For the most part the market adopted a wait-and-see attitude on hurricane “Lili” this past week. First, “Lili” was heading toward western Cuba with the long-range track taking the hurricane across Louisiana by late Thursday, Global Weather Services said. The threat the storm could pose to cotton crops in the Delta and the western Southeast, which already had come under heavy rainfall in the past few weeks, again proved supportive to the market. The U.S. Department of Agriculture's weekly report on the condition and progress of cotton crops released Monday afternoon showed that crop conditions, however, had deteriorated only slightly this past week. Figures estimated that 20 percent of the crop was in a “very poor to poor” condition versus 18 percent the previous week while 51 percent was in “good to excellent” condition compared with 52 percent the week before. The upgrade of “Lili” to a category-four hurricane on Wednesday combined with technical-led buying aided the market to climb gradually higher. However, it was once again a case of “buy the hurricane and sell the storm” as the subsequent downgrading of “Lili” combined with sluggish export data pulled the market noticeably lower. Export sales for the week ending September 26 reached only 54,300 bales off 73 percent from the prior week and 4-week average. Exports of 108,900 bales also came in light as they were 21 percent below the previous week and 16 percent under the 4-week average. Meanwhile, the speculative net long position as of September 27 came in at 13.2 percent versus the previous week’s 16.4 percent, which was in line with general expectations.

Though it was hurricane “Lili”, which topped the list at the beginning of the week, demand worries took over the market’s attention for the later part. Even the global weather problems from Greece over to Spain and Turkey as well as the Australian crop problems nor the continuous political debacle in the Ivory Coast were able to lift the market higher. Contrary, the bearish development of the US equities markets with its sixth straight week of significantly lower closes plus port closures up and down the US West Coast due to pending labour contract negotiations with the port authorities largely overshadowed the weekly performance of the New York Cotton Exchange.

The market has yet to break out of its general trading range of 40-50 cents for the nearby trading months. There is little on the horizon that seems to promise a sudden end to the present trading pattern and participants will have to accept the most likely scenario of prices being pressured by lack of demand while weather concerns linger, helping the market from tapering off too much further.

As for the US Pima crop, farmers could not have asked for much better conditions so far this season. Plants’ growth has been shut down via the application of defoliants and it is expected to see widespread picking out West by the middle/end of this month. Farmers continued to treat fields to control insects, particularly white flies, while the crop all around the US Pima belt presents itself in excellent condition with temperatures averaging several degrees above normal. Export sales for the week ending September 26 added another 5,800 bales to the previous total of 181,800 bales. Offering prices remain largely unchanged while demand is based purely on hand-to-mouth business.