ICE Cotton stayed in an uptrend this week with K4 holding ground and settling at 92.19, up over 100 pts. Futures, with the help of a friendly spec contingent that had anticipated the USDA’s lowering of 13/14 carry-out estimate (and increased exports), are doing their best to ration old crop demand.
While 85c had once been thought high enough to accomplish the job, the N-Z invert forced the basis lower, allowing export sales to continue and stocks to tighten further. 92c futures, though, may finally do the trick, and holders of old crop cotton will have little choice but to bring cotton to the board. Cert stocks have held steady above 250k bales – look for this to increase as we get closer to the notice period. At the same time, demand is increasing for new crop, and the USDA reported greater export sales for 14/15 this week than 13/14. New crop on call sales increased by 200k bales, and this trend will continue as long as the crop spread remains at current levels.
The copper market was spooked this week with talk of a slowdown and potential credit crisis in China following a poor trade figures. Energy, grains, and softs too fell back after the strong gains seen last week, as much of the bullish news was factored in those markets on the previous rally, and fundamentally many commodities are vulnerable to a drop in demand.
The Crimean referendum set for Sunday could yet set headlines, but on the economic agenda is the Federal Reserve’s FOMC meeting next week, with expectations for a continued tapering of asset purchases. New Zealand’s reserve bank became the first to actually raise rates, with a 25bp increase in the main cash rate, and perhaps marking the beginning of the end of the monetary response to the 2008 crisis.
