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The market is probing for a near-term low and a potential tightening of supply for the 2009/2010 season appears to be the factor which has helped provide underlying support in a period of weak international demand. Until the world economy bottoms, the outlook for cotton demand remains weak. However, there is talk of another 10% drop in US planted area for the coming season which is down from a 25-year low in plantings last year. In addition, land will be lost in the higher-yielding delta region and drought conditions are developing in Texas and California. Some rains in Texas this week may have helped ease dryness concerns but it will take more than one or two storms to bust the drought. The market inched higher in very quiet trade yesterday as traders saw the USDA supply/demand news as somewhat important but the focus of attention is on the end of the month planted acreage report. The US supply/demand data was mostly supportive while weakness in world demand kept the world numbers negative. World cotton consumption is now pegged at 111.1 million bales from 112.6 million last month. The USDA lowered US domestic cotton demand by 150,000 bales but exports were revised higher by 500,000 bales to 12 million. As a result, ending stocks are now pegged at 7.3 million bales from 7.7 million projected last month and 10.04 million bales last year. The positive tilt to the US report was offset by news of declining demand from China and increasing world ending stocks which are now pegged at 62.55 million bales from 61.71 million last month. China production was revised down by 700,000 bales and China import demand was revised higher by 500,000 bales to 7 million. China total demand, however, is now pegged at 46.50 million bales from 47.00 last month and from 51.5 million bales last year. Export sales news for the weekly update may have some impact today. Focus is shifting to the shipment pace and traders hope for weekly shipments near last week’s 253,500 bales.

TODAY’S GUIDANCE: December cotton is challenging the November lows and we would have to believe the market should find some fundamental support near the 45.80-42.70 zone.

TODAY’S MARKET IDEAS: Wait for a technical sign of a low before considering buying December futures or bullish option plays. For now, macro economic news may keep the trend down.

This content originated from – The Hightower Report.