Concerns that the world recession is deepening should lead to further downside pressure for the cotton market. Some of the few optimistic views on the cotton price outlook stem from either a potential tight situation next year if producers around the world cut production or if the world economy heats up after bottoming now and world demand begins to move higher from current projections. Both of these are potential longer-term developments but the short-term demand fundamentals look to worsen further. Increasing unemployment and a continued downward spiral in housing values suggest that US and world demand numbers may need to be revised lower. New clothes and new home furnishings seem to be near the bottom end of a list of things producers will be spending money on over the near-term. Near-term supply is ample and some traders are nervous that cotton export sales already on the books may be canceled if the world economy continues to slow. Mills are seeing a need to reduce inventory of cotton and are sitting on unsold inventory of finished textile products so even if there is a concern for potential tightness next year, few buyers are interested in committing to import cotton next year and pay for this commitment now. As a result, we could see slower than expected export sales news and also some cancellations of cotton booked at higher prices last year. The market managed to bounce early yesterday but a set-back in the stock market and a more deflationary tone toward commodity markets helped to pressure the market late yesterday. Weekly export sales will be released today and without a bullish surprise, the focus of attention will quickly shift to the world and US equity markets.
TODAY’S GUIDANCE: Technical indicators are still showing oversold readings but finding new buyers to support the market and avoiding new sellers or new speculative long liquidation selling will be a difficult task today.