There has been little change in the cotton market since our last commentary. The December contract closed yesterday at 74.75, only 13 points above where it began this week. With that in mind, I usually donΆt write a market commentary just to be writing one. However, I thought you might like something to read while sipping on your celebratory Cinco de Mayo margarita!

Also, there are a few developments taking place to mention which will, at some point, impact this market. First, though nothing new, the mills still have 4.5 million bales left to price based the July contract.

Give them credit, they are an optimistic bunch to hold out this long. Nonetheless, likely to feel quite foolish and a little lighter in the pocket come late June. Their counterparts, the spec community, maintain a strong affection for cotton clinging to a significant long position though pared from its historical high. As a result, expect to see December trade in the same tight range of the mid 70Άs while it awaits the July contract to go off the board.

This weekΆs exports sales report can be taken as a very positive one. Net old crop sales of 152,400 bales were up 32 percent from the previous week, but more importantly, almost three times the amount needed to exceed the year end export estimate of 14 million bales, which would be the fourth largest U.S. export volume ever.

New crop sales were equally impressive at 97,200 bales, with China buying a third of this volume. Shipments for the week exceeded 350,000 bales, which puts us on pace to reduce domestic supplies to practically nil before new crop can make the distribution pipelines. A sign U.S. cotton is very desirable to the trade.

You canΆt write about demand without mentioning supply, because sooner or later these two will have a significant influence on prices. CottonΆs capacity to maintain price stability as opposed to other competing commodities is resulting in the acreage increases earlier predicted. The region of largest growth, the Southwest, is experiencing very favorable weather leading up to planting.

Adequate water supplies and abundant subsurface moisture could produce a seven million bale plus crop from this area alone. Throughout the Cotton Belt, current field and weather conditions are poised to get this crop off to a very viable start. The one exception being the Midsouth, where flooding and an overabundance of rain may adversely affect stands forcing replanting decisions.

The timing of this may dictate a shift to soybeans, thereby reducing some of this acreage increase. At the moment, time is still on our side to get this expanded crop in the ground given the fast fruiting capabilities of our newer varieties. Be mindful, any difficulties resulting in fewer than expected acres will certainly fuel this market. Watch closely over the next few weeks.

The most promising of these developments, and one to have the greatest impact near term, is the strengthening demand for U.S. cotton. If sales and shipments continue at this pace, supplies will become very tight before buyers can get their hands on new crop. Keep in mind, after July goes off the board, December becomes the cover month.

Therefore, itΆs very possible this scenario could push prices higher in the months leading up to harvest. Despite the potential for a late summer rally, we still feel current prices will look good come late fall. As always, keep an eye out for pricing opportunities as the market ebbs and flows with the development of this crop.