Markets: open cotton vulnerable
Oct 30, 2009 10:12 AM, By Ray Nabors, Heartland Ag Network
Domestic cotton use is now predicted to hit a 24 year low. Weak demand is weighing heavy on cotton prices. In light of cotton demand, the market is overbought.
Cotton
Open cotton is vulnerable to rain damage. Harvest is only 20 percent complete. The harvest price pressure could be delayed. Most weather damage maybe priced into current markets.
Slow export demand indicates that world buyers are waiting for prices to fall. The rally in cotton prices has caused world demand to plummet. Domestic cotton use is now predicted to hit a 24 year low. Weak demand is weighing heavy on cotton prices. In light of cotton demand, the market is overbought.
Shipments are bearishly trailing the USDA forecast. Chinese cotton imports are dependent on sales of clothing and household good in the United States and Europe. Until textile sales pick up, demand will remain low. Traders expect another drop in weekly export sales.
Soybeans
Palm oil prices pulled back 2 percent after rising last week. Higher palm oil price supports soy oil prices and consequently the price of soybeans.
Oil prices have been volatile. It is normal for oil prices to decline in October and November. Companies that supply heating oil have already lain in supplies while less gasoline is used after the summer vacation season. The biodiesel connection to soy bean prices is increasing with increased energy demand.
Chinese importers have been moving into next year’s crop. The Chinese economy is up 9 percent over last year. They are shopping for opportunities to buy crude oil.
Soybean check-off money brought the 15 largest Chinese buyers to tour the Midwest. These buyers cover 80 percent of Chinese imports.
Brazilian weather is favorable for early soybean planting. Brazil has raised the biofuel content 1 percent, increasing biofuel blends to 5 percent. Argentina has started soybean planting early due to favorable weather.
Soybean production estimates from private sources have declined to 3 billion bushels. Harvest progress was bearishly in excess of market anticipation. Half of the soybean crop is not yet harvested. Export inspections were 43.7 million bushels. That is 3.5 million ahead of last week. Export sales are expected to drop 30 percent this week. Soybean exports are nearly twice the USDA forecast. Soybean traders are taking to the sidelines until weather affected quality and quantity can be accurately estimated.
