May cotton futures reached to 55.05 early, just shy of the 55.10 we projected, and then surged to 55.11 late in the session. This marks the beginning of cotton’s move to the 59-60 cent level which it should reach in the next four weeks. For today, we expect May futures to pull back to the 54.25 level before moving higher into the close.
FRIDAY 3/10: May futures opened up 23 to up 43 points at 54.40 to 54.60 on Trade buying and then rallied to 55.05 on Spec short covering. Futures then chopped lower until the last few minutes of the session when Spec short covering rallied futures into the close.
COMMENT: May cotton futures reached to 55.05 early, just shy of the 55.10 we projected, and then surged to 55.11 late in the session. This marks the beginning of cotton’s move to the 59-60 cent level which it should reach in the next four weeks. For today, we expect May futures to pull back to the 54.25 level before moving higher into the close. Merchant buying should be stout at 54.25, but they see no reason to chase this market yet. Most of the merchant buying will be to satisfy China’s need for raw cotton. China’s National Bureau of Statistics reports that China’s cotton fabric production continues to grow, with February’s figures 28.6% higher than last year’s and Sep-Feb growth 21.3% higher. USDA has been trying to get a grip on the China’s cotton consumption and has steadily increased their estimates over the past year, but these figures show they need to increase their estimates even more. Right now, USDA says China will use 45 million bales in 05/06 after using 38.5 million bales last year. But using China’s NBS figures for growth rates, if they were at 38.5 million bales last year they should be at least 46.7 million bales now. Interestingly, sources in China say their textile exports will only increase by 15% in the coming year because the Chinese population’s demand for textiles and apparel is growing so rapidly. This is important because domestic Chinese growth is new demand on world raw cotton supplies. China’s demand for copper and energy radically increased prices for those commodities and it could do the same to cotton prices, though most likely over a longer period of time. The US Dollar is steady, as are energy prices this morning. Soybean and corn prices are lower on Midwest rain. W. Texas received no rain over the weekend.
John Flanagan
Flanagan Trading Corp
1 800 830 0539
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