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Cotton: interest rates and imports

Cotton: Bullish news: Cotton is trading in a range above 80 cents. Traders expected weekly export sales to be 200,000 bales or less. The actual total was about 300,000 bales.

Chinese apparel demand is making record advances. The trend in cotton markets remains higher.

Cotton acre planting intensions for the United States are estimated at 10.5 million by USDA. This number is about 1.5 million acres less than market expectations. If cotton acres do not reach over 12 million supplies could be tighter than current USDA estimates.

Bearish news: Jobs are trailing economic upturns in the stock market. This is a normal situation when coming out of recession but cotton prices are limited by job growth reports. China and others in Asia are now expected to tighten credit policies in order to slow inflation.

Africa now expects cotton production to increase 18 percent.

India has increased interest rates to stem the tide of inflation. China is considering raising interest rates for the same reason. If these countries raise interest rates, that could significantly limit the amount of cotton exports to Asia and the price of cotton.

Rice: Bearish news: Supply and demand fundamentals for rice have not changed. Negative fundamental information maybe mostly factored into current market prices. India’s domestic rice purchasing is down 2.5 percent from last year.

Increased U.S. planting intensions are a heavy burden on market prices. International markets have been trading in a range until fresh news is available. Price potential is limited until total acres planted is known and production estimates can be accurately assessed.

Bullish news: Last week’s rice sales over 133,000 tons were bullishly above market expectations. Technical charts have turned positive. Remember that technical charts are short term indicators. Short term is usually within a week or two weeks at best. Fundamental information is long term from a month to a year. Rice has been oversold but that condition is corrected.

Soybeans: Bearish news: Palm oil prices are down 2.5 percent but production is expected to be down 10 percent. Palm oil prices have continued to decrease as supplies increase. Cancellations of soybean contracts with China are a major bearish factor. Weekly export sales of 214,600 tons were at the low end of trader expectations but those expectations were also lower than normal.

Soybean planting estimates among private sources are higher than USDA estimates by 1 million or 1.5 million acres. Traders expect wet soil conditions to turn acres from corn into soybeans. A million more acres would translate into a 3.5 billion bushel production. Estimated use is 3 billion bushels. Ending supplies of a half billion bushels are twice this year’s record carryover.

Bullish news: Transport problems in Brazil are causing shipping delays for soybeans and corn. Argentine transport personnel are on strike. United States grain and oilseed exports are temporarily better than they would be if South American exports were more available. Logistics problems with South American exports stimulated trader buying.

The increased soybean prices happened in light trading. Palm oil supply is expected to decrease this year. Palm oil prices turned higher. Higher soy-oil and soy-meal prices support higher soybean prices.

China continues to buy U.S. beans supporting higher prices. China imported 7 million tons this year representing an increase near 12 percent over last year. Export inspection over 32 million bushels put total yearly inspections 12 percent above average.

Corn: Bearish news: Corn planting intensions have increased. If 88.5 million acres are planted and yields are average or above, then supply will be nearly 15 billion bushels. Expected use is 13.5 billion bushels. That leaves 1.5 billion bushels of carryover, which is smaller than last year’s 1.7 billion but still comfortably high enough to limit prices.

Corn market traders are moving into more sell contracts (short positions). Total corn inspections are 4 percent below average.

Bullish news: Corn prices have gained momentum when dollar values have dropped. Israel is shopping for U.S. corn. Export inspections were 42.6 million bushels as expected.

Traders expected weekly export sales would not exceed 600,000 tons. Weekly exports came in at a bullish 747,000 tons. That number is nearly twice the export sales of last week. Goldman Sachs is predicting corn prices of $4.75 before this year is completed.

Excess soil moisture in the entire Corn Belt continues to be a concern. Planting is now likely to be delayed. Acres could switch from corn into soybeans. That would be bullish for corn.

Wheat: Bearish news: Dollar values are driving the wheat market. Higher dollar values would be bearish. Traders are increasing short positions (sell contracts) in wheat markets.

Spring wheat acres in the United States could increase with additional soil moisture in the wheat belt. Above average moisture will increase production in the United States and Canada.

Rain in parts of Australia are 30 percent above average and making more wheat than anticipated. Europe is dumping more wheat onto world markets to make storage space for the upcoming wheat crop. India estimates wheat production at 82 millions. The government is increasing storage capacity.

Bullish news: Weekly wheat export sales remain steady. Weekly export sales met market anticipation at 325,000 tons. Algeria bought 300,000 tons for next week. Demand remains higher than markets anticipations. Export inspections were average at 19 million bushels but that is a 78 percent increase over last week.

India has bullishly decided not to export wheat until summer. In an attempt to limit food inflation India approved indefinite tax free wheat imports.

TAGS: Cotton
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