Wednesday, February 1, 2012

"US Drought and China Lend Support to Cotton Prices"

Well duh.
Back on Dec. 15 we said:
A reasonable target would be the bottom of the chart gap in the 130 area a ~50% move from this morning's 85.680.
That wasn't our first post on cotton, we mentioned it in a climate post at 1.10 in September and again at 91.61 on Dec 30.

Here's the one year chart from FinViz, the white stuff was trading 93.89 last I saw.:


From Agrimoney:
Cotton prices, which on Tuesday closed at a 2012-low, could yet revive should China come good on the huge orders of the fibre it has made from the US, National Australia Bank said.
Separately, Rabobank upgraded its forecasts for cotton futures, warning that a longstanding drought in America's main southern growing areas "remains a concern".
National Australia Bank, while acknowledging that prices were likely to weaken over 2012, took issue with a common expectation that values are in for a short-term tumble.
"There is sufficient support for prices here," NAB agribusiness economist Michael Creed said, adding that "near-term upside risk is evident".
Futures could be revived by strong demand from China, which has 4.3m running bales of outstanding orders from the US for 2011-12 yet to ship – 50% more than a year ago.
'Fairly solid floor'
"Should China actually ship the large US sales [orders] it has made recently, and the US stocks situation starts to become tight, there is a risk that New York futures become focused on a relatively tight US situation," Mr Creed said.
Indeed, plugging US Department of Agriculture forecasts into a variation pricing model drawn up by the International Cotton Advisory Committee, an intergovernmental group, suggested an average price of about 112 cents a pound for the Cotlook A index of physical values, above where it has traded for much of 2011-12....MORE
"Corn, cotton futures offer chance of hefty gains"
Cotton: "Texas Drought Could be Extended by Rare Third Year of La Niña"
Pray for Texas (and maybe buy some cotton futures): "Historic La Nina imminent?"