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December Cotton Futures Since 2004 and Associated Stocks-To-Use Ratio (Scroll Down for More Discussion)

Graph of speculative traders in cotton futures

Discussion

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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The Cotton Marketing Planner
http://agecon2.tamu.edu/people/faculty/robinson-john/

Dr. John R. C. Robinson
Associate Professor
Extension Economist-Cotton Marketing
Department of Agricultural Economics
Texas A&M University
2124 TAMU
College Station, TX 77843-2124
Phone: (979) 845-8011
Fax: (979) 845-4906
Email: jrcr@tamu.edu