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The market has stayed in a relatively tight range this month, despite active movement in other commodity markets and a shifting tone on general economic conditions. While there has been a shift in the economy’s tone from one of serious gloom and doom to one of more optimism that the deflationary cycle can be stopped, the market has remained in a consolidation. Fears of inflation have helped push the market close to its highs for the month, but the action remains sluggish. December cotton pushed sharply higher on the session early in the day yesterday and managed to hold onto part of its gains to close moderately higher on the day. The sharp drop in the US dollar, a surge higher in gold and ideas that planted area in both the US and China could drop off too far this year to avoid an eventually tightening of supply for the 2009/10 season lent support. Weekly export sales for cotton came in at 204,200 running bales for the current marketing year and 5,400 for the next marketing year for a total of 209,600, which was near the low end of trade expectations. As of March 12th, cumulative cotton sales stood at 93.6% of the USDA forecast for 2008/09 (current) marketing year versus a 5 year average of 80.5%. Sales of 36,000 running bales are needed each week to reach the USDA forecast. Weekly export shipments were just 165,600 bales, well below trade expectations. News from the National Weather Service that the southwest and southern sections of the US will be drier than normal may have helped provide some support. Certified cotton stocks deliverable to the exchange fell to 225,097 bales from 228,002 bales the previous session. Many traders seem to believe that planted area will be close to 8.5-9.0 million acres for the coming season from 9.47 million last year, which was already a 25-year low. The National Cotton Council’s survey of producers pegged plantings as low as 8.1 million. In China, a survey of producers from the China Cotton Association showed that farmers may plant 13.9% fewer cotton acres this year vs. last year.
TODAY’S GUIDANCE: Rising open interest is a positive technical indicator. December cotton buying support comes in at the 47.55-47.22 zone with 50.38 and 51.68 as near-term upside objectives.
