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5/9/08 Cotton futures prices
have been trading mostly sideways this week. The
USDA supply and demand report US ending stocks
estimates came in at 5.60 million bales down from
9.90 million bales in 2007-08. Global ending stocks
are 56 million bales down from 62 million in
2007-08. Cotton option premiums are high.
5/1/08 Cotton futures prices are
still falling based on the strength in the US
Dollar. Higher dollar values hurt cotton exports to
other countries. Cotton acreage is still at decade
lows and any weather events could spur a rally.
Cotton option premiums are high.
4/25/08 Cotton futures prices
dropped this week in sympathy to the overall
commodity market and especially the grains. The
strong US Dollar hurts exports because of higher
prices for foreign buyers. The sell off in crude oil
from the highs also hurts cotton because when crude
oil prices are high textile mills use natural fibers
like cotton instead of manmade petroleum product
fibers like polyester and rayon. Cotton option
premiums are high.
4/18/08 Cotton futures prices
rallied through 80 cents this week only to be hit by
massive profit taking from commodity funds. The USDA
is predicting a 13% drop in planted cotton acres
this year because of favorable pricing in corn,
beans and wheat for farmers. Cotton option premiums
are high.
4/11/08 Cotton futures prices
rallied this week as Walmart bought 12 million
pounds of cotton for earth month t-shirts. Cotton
also lost acres to corn and soybeans and had a huge
week in export sales of 484,000 bales. Cotton option
premiums are still high.
4/4/08 Cotton futures prices are
trading sideways this week even as the USDA
predicted the cotton acres to be down 13% from a
year ago. Cotton futures prices had been on a tear
recently but seemed to have gotten ahead of itself.
The dry weather in cotton growing portions of the
south and TX may boost prices but for now the
cotton market is content with sideways price action.
Cotton option premiums are high.
3/28/08 Cotton futures prices
were consolidating this week and traders were
positioning for the March 31 Prospective plantings
report by the USDA. Expectations are that cotton
acres will shrink because farmers can make more per
acre with soybeans, corn and wheat. Cotton option
premiums are high.
3/21/08 Cotton futures prices
kept falling this week as Wall Street hedge funds
and commodity funds liquidated futures positions to
cover margin calls in stocks and to pay back
borrowed money. The Bear Stearns issue took the
confidence from investors. The Fed's 75 basis point
cut surprised investors because a full 100 basis
point cut was expected. Cotton option premiums are
high.
3/14/08 Cotton futures prices
went limit up for a couple of days and then limit
down. Now prices are consolidating sideways. In 14
years of trading, I have never seen such volatility.
Cotton futures have more price increases to achieve
if farmers are to plant it instead of corn, beans
and wheat. The new low for the US Dollar may help
prices go higher especially if the Federal Reserve
Bank cuts rates again. Cotton option premiums are
ridiculous and some sideways price movement will be
needed to deflate cotton option premiums.
3/7/08 Cotton futures prices
went up limit for 4 days in a row only to sell off
limit the last 2 days. The short futures price
squeeze produced ridiculous option premiums as short
futures holders flooded to the options markets to
offset losses. Cotton option premiums are outrageous
currently.
2/29/08 Cotton futures prices
rallied to contact highs this week based on the
battle for acreage with beans, corn and wheat. The
National Cotton Council predicts that cotton mill
use fell from 4.74 to 4.68 million bushels in
January. Cotton futures prices have the challenge of
rising enough to compete for acreage with other more
profitable agricultural products. The potential 50
basis point rate cut expected by the Fed in March is
also helping prices rise on inflationary fears.
Cotton option premiums are high.
2/22/08 Cotton futures prices
rallied this week the highest close in a month
because cotton looks cheap to speculators compared
to the grains. The USDA planting estimate came out
this week and shows cotton acreage down 12% to 9.5
million acres this year. If this estimate is
correct, that would be the lowest plantings in 25
years. All time highs for crude
oil futures prices also supported the cotton futures
market. Cotton option premiums are getting high.
2/15/08 Cotton futures prices
were up limit on Thursday of this week based on
expectations of very limited acreage being planted
this year. The USDA projected cotton production for
2008-9 is expected to be down 9%. The soybean to
cotton ratio of 10 to 1 is one way that farmers
decide what crop to plant. It is usually 3 to 1 for
corn to soybeans. The 10 to 1 ratio would
necessitate cotton futures prices going up over a
dollar. The soft commodities have definitely
outperformed most other commodities this year and still seem
undervalued vs. the rest of the commodity market.
Cotton option premiums are above average.
2/8/08 Cotton futures prices
rallied in sympathy with the grains and because the
USDA says that exports are better than expected.
Cotton futures prices have been consolidating around
70 cents for the last few weeks. High crude oil
prices helps cotton demand because synthetic fibers
such as polyester, nylon and rayon are petroleum
based and are expensive compared to cotton. Cotton option
premiums are above average.
2/1/08 Cotton futures prices are
trading sideways this week waiting for next Friday's
USDA report. Currently the US cotton planted acreage
estimates are near an 18 year low as farmers are
paid more to plant corn, beans and wheat at the
expense of cotton. Cotton futures prices rallied to
$1.17 the last time that global supplies where this
low. Cotton option premium is above average.
-T & K Futures and Options Inc. |
