COTTON DIVISION

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

December 15 - 19, 2003

Market participants had to wait all the way until the last trading day of the week to witness some activity at the Cotton Exchange. Prices had been largely unchanged for the most part this past week as volume in the pit never exceeded what can only be considered as subdued business. The usual pre-holiday mood had struck and the daily trading range remained very limited until the announcement of sizeable soybean purchases by China caused some analysts to anticipate a similar event for US cotton suppliers. Wild speculation has commenced over when such purchases may occur and to what extend. If such sales were to be consummated, the likelihood remains high, that it may well happen during the forthcoming holiday period. In anticipation the speculative camp has sought additional cover by extending their long position once again after it had just been reduced to 30.1 percent for the week ending Friday, December 12 from 34.6 percent the previous week. The weekly export sales report, though constructive with new sales of 207,500 bales, 38 percent ironically provided only short-lived support to the market as general expectations had called for higher sales volume. It will be interesting to see whether the US Dollar weakness, reaching new record lows among others against the Euro, will spark additional, significant sales as some are anticipating.

Given the thin trading volume these days, surely sudden moves in the market cannot be ruled out in either direction, however, once the more regular trade pattern resurfaces, it is generally expected that prices will move higher, reflecting the current development witnessed in most other commodities, soft or industrial.
Pima export sales for the week ending December 11 came in strong as expected since it represented the next to last week during which the USDA ELS subsidy has been available. New sales amounted to 37,300 bales, lifting total commitments to 388,100 bales compared with 373,200 b/c at the same time last year. Equally impressive and sparked by the same reason, actual exports of 42,200 b/c represented a marketing-year high, with China the primary destination receiving 19,100 bales. Meanwhile, harvesting being completed, ginning facilities in California continue to run 3 to 4 shifts per day whereas Pima growers in Arizona, New Mexico and Texas are still picking their fields, partially for the second time as detrimental weather had delayed some of their earlier efforts. While some observers are already trying to forecast what the next season may bring in terms of supplies and respective pricing of the production, many are simply pondering the development of ELS prices worldwide in the coming weeks. Although official prices in the first week since the discontinuation of the subsidy program showed sharp increases, it is widely expected that sales in coming weeks will not only suffer but asking rates are anticipated to come off their current highs. Such development is to entice sales, which even at 10 or 20 cents below current offering rates, represent still a very attractive return to producers.

We wish to take this opportunity to wish everybody a wonderful Holiday Season and a Happy New Year.

• Previous Report