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We hesitate to believe that there will be sufficient new buyers for US cotton after the recent jump in prices and considering the strong US dollar. China import demand is slowing and exports of textiles are also down sharply from last year. There does not seem to be a weather issue in the US and while stocks could tighten significantly for the 2009/2010 season if demand were to recover, near-term supply remains high and ending stocks for the US and world are ample for the 2008/09 season. Cotton closed sharply higher on the session yesterday and to the highest level since February 9th with a sweeping outside trading session. A recovery in the stock market and ideas that the export market will continue to hold firm helped to provide underlying support. A perception of a recovery in the economy may have added to the positive tone and a jump in soybeans and other commodity markets may have helped support as well. Merchant buying and speculative buying was noted. Rain over the past weekend should help to boost plantings for the coming week. The Texas crop is now 17% planted as compared with 16% as the 10-year average for this time of the year. China imported 98,763 tonnes of cotton in March, down 53.7% from last year which pushed imports for the entire first quarter to 269,839 tonnes as compared with 528,988 tonnes last year or down 48.8%.

TODAY’S GUIDANCE: While we continue to hear of the strong commercial and spec buying on breaks, a lack of new sellers is likely more to the point. Since April 6th, open interest is down 15% and this does not seem to be much of a foundation for an extended rally.

This content originated from – The Hightower Report.