By Jeff Thompson, Autauga Quality Cotton Association Manager

Fortunately, the market has begun this week much calmer than the previous one. We have had three consecutive trading sessions of positive gains with May and Dec futures closing today, March 7th at 57.38 and 57.26, respectively. Though still significantly below our long standing trading range it is well above the 54.53 low hit last Monday.

Largely responsible for this volatility is the uncertainty which still reigns supreme. China continues to leak rumors of an impending announcement concerning policy changes in dispersing their cotton reserves. There is even some speculation China themselves may be shorting our market to manipulate prices.

At the recent Cotton Outlook Forum global cotton production was estimated to increase by 8 percent. All this has the market searching for a place to trade.

There are some positive indicators now coming to light giving us good reason to believe market support is at hand. Despite the ForumΆs increase in world production it still estimates world stocks will decrease for the second consecutive year. Last weekΆs export sales numbers were up over 50 percent from the previous week.

Only slightly below the average sales of 250,000 bales a week needed to meet the USDA export estimate. Historically, in a bear market the first thing to decline is the basis, then followed by futures prices.

Today, however, the basis remains very strong indicating demand is there but further signs of a significant increase in cotton demand will be necessary for any sustained run back to the mid 60Άs.

The specs are solidly short the market at the present time but one must realize they donΆt produce cotton. So therefore, at some point, they will be forced to go long and buy the market lending it support.

As IΆve said numerous times before, patience will be needed as we wait for this market to turn itself around. Thankfully, we have a marketing loan program providing us price protection up into the mid 60Άs with its LDP buffering futures prices.

So despite this market sell off, we have in essence been treading water as the LDP has risen, currently at 8.71 cents. Add a strong sales basis for fiber quality to this and one has the potential to price cotton at or near 70 cents, even today.

The same holds true for new crop, as much can happen over the next 6 to 8 months and it invariably will.

Continue to do what you do best by producing the finest and cleanest cotton the world has seen and we will look for pricing opportunities as they avail themselves