The US Agriculture Department set the prevailing world market price for upland cotton at 36.16 cents per pound, effective through January 20. The price is adjusted to US quality and location for Strict Low Middling, 1-1/16 inch upland cotton. "A continuation of last week's rally stalled Wednesday near the midpoint of the 47-48 cent range, as had been predicted.
The release on Wednesday of the January supply demand report, with its increased crop size, as well as an aggressive increase in the demand for US cotton and Chinese consumption estimates, was not enough to jump start the rally by week's end.
Some interpreted USDA's supply demand report as bearish since it predicted an increase in world ending carryover over last month's estimate. However, the demand estimates likely spell further demand growth this season and thus, a lowering of the carryover stocks later in the marketing year.
Longer term prices are marginally higher; especially the new crop December 2005 contract. However, near term prices will continue to work the current 43-48 cent range with an outside chance for the March contract to test the 50 cent level. Nevertheless, March is likely to spend additional time trading the 44 cent level.
"The primary changes in the January supply demand report were well expected by the market. The world crop was expanded to 116 million bales; consumption was increased to 104 million; the Chinese crop was lowered 500,000 bales to 29.0 million; Chinese consumption was increased 750,000 bales to 36.75 million; and the US crop was increased to 23 million bales. Further, the crops in India and Pakistan were substantially increased.
"The perceived bearishness of the report was based on the fact that USDA increased world ending stocks for the current marketing year from 46.5 million bales to 47.1 million bales, a 600,000 bales increase.