The current trading range continues, as the market analyzes the impact of flooding in the U.S., continued dryness in Australia and the first initial official announcement by the Chinese government with respect to its new cotton policy.
USDA’s September World Supply Demand report gives us no reason to believe that the narrow 62 to 72 cents trading range will change in the coming month. But the market will likely draw its direction from Mother Nature in the coming weeks.
Ongoing anticipation of the Chinese government’s announcement regarding price supports for the 2014 crop has driven cotton prices back near the bottom of the current trading range.
The delay of deliverable 2014 world production supplies, coupled with limited availability of old crop export grade cotton, has kept a bit of a fire burning under the market.
Concern over the amount of cotton available outside of China continues to dominate trading.
What many considered a very bearish August Supply/Demand Report has been digested by market forces and determined to be market neutral. Most likely, the 62 cent price floor has developed enough depth to protect the price from sliding any lower.
Cotton prices attempted to consolidate a bit this week in the face of weather problems around the globe, as well as Chinese mills seeking imports of high grade cotton.
Market technicals suggest the 60 to 62 cent level will hold for prices in the very short run – depending, in large part, on weather patterns for Texas and India.
Cotton prices remained under pressure this past week. But the downtrend was flat, indicating that the market is ready to start curing low prices.
With December futures, a drop to 65 cents is all but certain. But this week’s export sales report indicates a major sales increase in the face of declining prices. And, the sales report for next week should be just as strong.