Improvement Expected for Cotton Exports

Name: Jurgens Bauer Company: Jurgens Bauer & Associates

Favorite Movie: Shawshank Redemption and Rumblefish

Today's export numbers should show noticeable improvement, if for no better reason than prices are lower. The market response should dictate whether there will be a return trip to the lows, (5690 was the synthetic low for December).

Here are the U.S. export sales for the week ending 8/16/2007

Cotton: Net upland sales of 397,600 running bales were 12% above the prior week. The major buyers were China (141,500 RB), Turkey (111,300 RB), Mexico (27,100 RB), Thailand (23,800 RB), and Taiwan (23,300 RB). Exports of 310,900 RB were 9% below the week earlier and 23% under the prior 4-week average. The primary destinations were China (117,100 RB), Turkey (55,700 RB), Mexico (32,400 RB), Indonesia (30,000 RB), and Thailand (13,700 RB). Net American Pima sales of 3,900 RB resulted as increases for China (2,600 RB) and Pakistan (1,800 RB), and were partially offset by decreases for Japan (1,300 RB). Exports of 14,000 RB were primarily to China (3,600 RB), Japan (2,800 RB), Turkey (2,600 RB), India (1,900 RB), and Pakistan (1,300 RB).

The report should be friendly and values are up slightly, but not as much as I would have expected.

CTZ was 5835/5858 prior to the number, and now shows 5860/5865.

Demand (seen most assuredly in export numbers) is a key element, and progress there will encourage bulls. However, the driving force during the past few sessions seems to have been option strategies. Monday and early Tuesday prices advanced on fund involvement and supply side concerns. And Wednesday prices had what amounted to an inside day with volatility coming in a bit as indicated by the premium of both puts and calls getting reduced, while December settled essentially unchanged on the day. Other months were lower. Perhaps this indicated some short covering in Dec.

There are reports that Pakistan, India, and China crops are all progressing and looking better than expected. Grains were strong, but cotton didn't trade in sympathy. I suspect that there are specs waiting in the wings to bu,y and bears will get increasingly frustrated if 5800 cannot be broken in December. Even if it is, I think 5775 or 5750 will hold, but I continue to like the long side here—risking a close below 5690. Hey, any move above 5950 should attract more new buying, as will 6000 if it gets seen. Shorts will likely abandon their positions tomorrow if Dec reaches above 5885.

This morning CTZ in e-trading has a high of 5862, and the low is 5835.

The Dec/March spread is quoted 334/331.

Since Dec settled outcry yesterday at 5836 the opening is looking 25 better right now.

Technical: Down

Support: 5780-5775, 5710-5680,

Resistance: 5900, 5959-5955, 5995-6010

Coffee Comments

Wednesday action included the rolling of a lot of positions out of Sep and into Dec. This increased activity was due to notices being issued following the close, and was substantially accomplished in outcry trading. It seems that traders utilize outcry more reliably when it gets down to the wire, and it was pleasing for many a floor broker to see the larger outcry volume as a percentage of the total futures traded on the day. The Sep/Dec spread widened and had a range between 405 to 440 points. The Sep-Dec spread settled at 435 points versus 410 points Tuesday.

On the weather front, Hurricane Dean thrust into Tecolutla, Mexico, at midday as a
category 2 storm, with 100-mile-per-hour winds. Reports are that groves received a drenching. Although the worst of the high winds are over and the storm has been downgraded to a Category 1, there still will be 5 to 10 inches of rain over parts of southern and central Mexico—with up to 20 inches in some areas. Important Central American groves so far have been spared the storm's wrath. As it is Hurricane season, another disturbance is brewing and more rain is scheduled to occur in Florida. I have heard some concern that since coffee is stored in warehouses in Florida ports and along the gulf, it could give rise to lending a supportive influence on prices. Maybe an eye should be kept on developments, but so far there is no reason for alarm.

Currently the Sep/Dec spread is quoted 4.10/4.00

Dec settled outcry at 118.80 and is currently 119.50/119.65, so far the range in e-trading has been 119.60 to 118.75.

Technical: The trend is still down.

Support: 118.20, 117.60, 116.95

Resistance: 119.70-119.85, 120.10-120.40, 121

Crystal Ball: I favor the long side, even while the trend is down. I may however p[lay the market from the short side today.

Cocoa
Cocoa prices did go higher Thursday with December trading up to 1795, before settling in at 1791.  Volume in electronic was 7,131, outcry 477, with 171calls and 269 puts. Featured option trades, 100 V 17.5p/18.5 p went 63 (with paper buying), and 50 of the V 17.5p/19.5c bear fences went 24 points. That makes it three days in a row of higher values. With resistance expected at 1800, it might make sense to look for move down.

December settled outcry at 1791, with a high of 1795 and low of 1763, it is now last 1787/88.

Support: 1765/60/50, 1700-1685

Resistance: 1790-1800, 1810-1812, 1843

Still looks like it will take a close above 1840 to turn things around.

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