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Cotton continues to push down following more bearish demand news from the USDA this week and expectations that world demand could be adjusted lower in the months ahead. While traders have believed that the outlook for lower planted area this year could spark extremely tight ending stocks for the coming season, these “tightness” expectations have diminished dramatically in the past several months due to downward revisions in demand and higher stocks. Traders await the planted acreage survey update from the National cotton Council for release this afternoon which is expected to show plantings from 8.0-9.0 million acres as compared with a 25-year low 9.4 million last year. If we assume 8.5 million planted and the same yield and same usage as this season, ending stocks for the 2009/10 season would come in near 5.14 million bales with a stocks/usage of 33.4%. In the 20 years since the 1998/99 season, stocks/usage has been above 33.4% in just five years. If we assume a yield the same as 2007 and the same usage as this season, ending stocks would come in near 6.23 million bales with a stocks/usage of 40.5%. In the past 20 years, the stocks/usage has been above 40.5% in just three years. May cotton closed moderately lower yesterday and closed lower for the third session in a row following poor demand news from the world and US supply/demand report earlier this week. Weakness in the stock market and a strong dollar helped pressure. Net weekly export sales for cotton, came in at 109,400 running bales for the current marketing year and 3,000 for the next marketing year for a total of 112,400. As of February 5, cumulative cotton sales stand at 81.8% of the USDA forecast for 2008/2009 (current) marketing year versus a 5 year average of 71.9%. Sales of 78,000 running bales are needed each week to reach the USDA forecast. Shipments were 166,900 bales from 205,800 bales the previous session. Open interest has slipped to 118,857 contracts, down from 123,430 the previous session and down from over 300,000 contracts in March of 2008. California is having issues with water usage and Texas soil conditions are extremely dry but it is still too early for weather to support.

This content originated from – The Hightower Report.