U.S.A. – The New Year began where the old one left off, with the cash market active on the heels of the early strength in the ICE Market. Growers who have been withholding their crops, mainly for tax reasons, are now in a position to complete the marketing of this season’s cotton crop. The vast majority of the U.S. crop is now in the hands of the trade community or has moved into the export market and/or committed to the local textile industry. The two areas of the country, where any significant volume remains with the producer, are the Southeast and West Texas. In the coming weeks, attention will begin to be focused on the prospects for the 2010/11 crop. More will be written about this in the future as more updated information becomes available. However, by most accounts the prospects for an increase in cotton acreage of at least 10 % looks promising.
Turkey – A very disappointing crop of only about 380’000 tons has already been well sold. Demand for local cotton has been good since the beginning of the season. The quality though is mixed and good grades are limited. Thanks to the excellent prices obtained by the farmers and the subsidy from the government, we will see a higher production of at least 20% for next season. Spinning mills have recovered from the crisis and many of them started to work at full capacity again. The demand for cotton is good and consumption can potentially reach 1’200’000 tons. Without any doubt, Turkey will again be a big importer this year.
Syria - The estimated production for this season is around 240’000 tons, a decrease of about 10 % compared to last year. The quality looks good. Demand has been active for Syrian cotton lately, particularely from Turkey.
Spain – Harvesting of the 21’000 tons crop was already finished beginning of November 2009. Yields turned out at a record low of 1500 kgs/ha, due to lack sufficient fertilizers. The crop has moved 100% in traders’ hands. Spain decided that next season only cotton with a yield of minimum 2500 kgs/ha will receive subsidies from the European Union. That will force the farmers to apply more fertilizers and pesticides and most probably lead again to higher yield.
Greece – From the 2009/10 exportable surplus of 160’000 tons (200’000 tons production less 40’000 tons local consumption), it is assumed that 70’000 tons are still unsold at origin. The balance has been sold mainly to Turkey, and some positions are in the hands of the international trade. Color-grade HVI-31 is again scarce and the majority is HVI-41 with a staple of 1.1/8” full, a micronaire range between 3.7 and 4.6 and a strength of 28/29 gpt (HVI). Current offers of Greek ginners are quite high, motivated by the rather small unsold quantity and their feeling that Turkey and also Egypt might continue to be regular purchasers of Greek cotton. The 2010/11 crop is expected to be 15 – 20 % bigger.
China – Since our last report of Dec 18, prices at ZCE continued to strengthen considerably until beginning of January, but took a sharp dive on January 6 and 7. The downturn on January 7 was triggered by the surprising raise of yields on China’s Central Bank 3-month bills. Most other commodities and stock markets also closed lower. Demand for imported cotton was rather slow until last Wednesday, when mills started to inquire and buy in volume after the weak ICE close on January 5th. Import quotas have been allocated in the meantime. Most of the import quota under the sliding duty system has been given as processing quota, thus limiting import business for the time being mainly to mills working for the export market.
Outlook – The chart looks now rather negative; the broken 73.00 (basis H10) key support could indicate a move to the critical support zone between 70.00 and 68.00. In order to regain upside optimism, prices need to clear at least 74.50 in the short-term. A convincing close and confirming action above the key resistance resting around the 76.50 level should eventually lead prices to the area between 80.00 and 82.50. In this case, it may well represent the last major up-leg from the August 2009 lows.
