There were 1,621 delivery notices issued against the March contract. JP Morgan, believed to be for the account of Cargill, issued 1,270 and Dunavant 228. The big long is Allenberg catching 1,545 which, of course, means they have 95 percent of the long positions. In retrospect, very possibly last weeks spec/hedge which showed commercial "house" longs holding fully steady was the clue that a MMM "house account" was the big long. As of last Tuesday, there were 125,231 bales from the 2007 crop. However, that statistic will be updated Monday.
Cotton prices caught fire on extremely heavy volume as both commercials and speculators rushed to cover positions in March in "panic proportions." Strength in March contract was primarily attributed to a lop-sided 20 to one imbalance of unfixed sales to mills vs. unfixed purchases from producers. Going into Friday, there were still well over 10,000 March still open, which made for a volatile ending to a volatile week that included two limit moves.
May cotton, on the other hand, caught the fancy of technically oriented speculators as well as large funds and money mangers. Cotton has long been looked at as a laggard in the commodity complex and generally as under valued from comparable row crops. With the Commodity Research Bureau Index posting all time highs each day this past week – gold, silver, soybeans all making all-time highs and cotton breaking out of a multi-week consolidation area, buyers rushed to participate.
December cotton followed right along as the battle for acres reached a heated pitch. According to info released at the USDA Outlook Conference, ending stocks for cotton in 2008/09 could drop as much as 4.5 million bales to 3.7 million bales - That is the kind of fundamental statistic that bulls build the 80-90 cent bull case on. Also at the conference, Dunavant suggested that plantings could drop as low as 8.8 million acres from the 9.5 currently projected and until Dec exceeds 85 cents, it will continue to lose the acreage battle.
For the week, March cotton gained a whopping 680 points, May 541 and December 526 points. Technically, all months reached or exceeded their swing objectives generated by last weeks breakout. The gaps left Thursday and Friday have left the market a bit exhausted. However, May should find pullbacks between 7350 and 7150 (7250 midpoint) and Dec between 7950 and 7750 (7850 midpoint).
