Cotton price activity remained firmly trenched in its consolidation phase all week as mill buying and limited merchant buying kept New York futures from succumbing to attempts to push prices lower. Export demand for U.S. styles remained especially strong as additional concerns of crop conditions around the globe heightened.
The ability of the market to hold above the prior week's lows and settle higher represents a positive sign for upward price movement. The 56-57 cent lows will likely hold and the market is now prepared to look toward 60 cents.
Export sales highlighted the week as, for the third consecutive week, crop sales were very strong. Net sales for the week ending 8/23/07 totaled 476,300 RB with Upland cotton accounting for 447,700 RB and Pima cotton for 28,600 RB. Chinese purchases totaled 216,000 bales followed by Turkey at 53, 200 bales.
Mexico, Indonesia and Vietnam were also major buyers. Shipments totaled 322,900 RB of which 319,300 RB were Upland and 3,600 RB were Pima. With another week and a day remaining in August, monthly export sales could climb to near two million bales.
Much of the current buying by China was for immediate to near term delivery. U.S. prices are some of the lowest in world and the U.S. near record level of cotton inventory available for immediate shipment is well known. While some harvesting in China has begun, it has not progressed to the point of putting pressure on local Chinese prices.
With cheaper U.S. cotton available, coupled with the volume of import quotas still held by Chinese mills, they will remain big buyers. Most likely they will not want to let the quotas go unused. Next week's export sales report should match this week's. With New York trading below 60 cents, mills will continue to buy in volume.
Yet, the impending upward movement in price will be held in check until more is known about the Northern Hemisphere crop. Certificated stocks remain near 700,000 bales and demand, strong as it appears for now, is likely not enough to significantly reduce this level prior to the harvest of the 2007 crop.
The market creeps higher into the low 60's, but the emphasis is on "creeps."
