The fundamental underpinnings of Dec07 can be further examined by comparing forecasted stocks-to-use at the same point in time (i.e., the preceding July) which were influencing Dec04, Dec05, and Dec06 prices. Under the influence of the current 27.6% stocks-to-use forecast, Dec07 is trading roughly ten cents higher than previous December contracts at this same time period (mid-July). Yet Dec07 stocks-to-use is in between the forecasted stocks-to-use Dec04 (26.3%), Dec05 (33%), and Dec06 (22.2%). Those futures contracts were trading in the mid-50s during the preceding July. This highlights to me the influence of non supply/demand forces on cotton futures, e.g., maybe speculative selling on Dec04, and definitely speculative buying on Dec07. I don't see the supply/demand rationale for Dec07 maintaining in the upper 60s-70 cent range.
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