Tuesday, May 13, 2008

There was an earthquake in China yesterday registering 7.9 which has caused substantial loss of life and damage to homes and buildings. Major power outages have been accruing over a large area of central China since then, yet it is too early to tell what effect this will have on China’s economy and especially to its textile industry.

USDA’s Weekly Cotton Progress Report for the week ending May 11, 2008 showed that 36% of the 2008/09 cotton crop has been planted. This compares to the previous week’s 26%, the previous year’s 41%, and the five-year average of 44%.

There were 10 cotton notices issued today bringing the total to date to 3,113. There was only one issuer, ADM-10, and only one stopper, Newedge-10.

The May '08 open interest this morning before the notices was 212 contracts, down 93. The July '08 open interest was 125,518 contracts, up 181. The Dec '08 open interest was 105,137 contracts, up 1,783. Certificated stocks totaled 1,378,497 bales, up 25,980 bales from the previous report. There were 111,263 bales awaiting review. The 2007/08 North European A-Index was up 25 points to 76.65 and the B-Index remained unquoted. The Far Eastern A-Index was also up 25 points to 74.95.

At 8:15AM July was trading at 71.45. July opened this morning at 72.00 which is also July’s current high. July’s current low of 71.41 was made about 10 minutes before the option pit opened. After the option pit opened July traded back up to 71.67. About 10 minutes later July came under some new selling and was pushed down to a new low of 71.05. In Chicago the electronic grain markets ended their early morning session with Soybeans up 5 ½ cents, Corn down 3 ¾ cents, and Wheat down 1 ½ cents. The Dollar was much stronger this morning, trading about 47 points higher based the Dollar Index. Crude Oil was trading about 40 cents higher. After making its new low, July was able to rebound back up to around 71.40. July then chopped erratically between 71.40 and 71.11. Just before the opening of the Chicago grain markets July broke down under 71.00 and to a new low of 70.90. However, July did not stay long under 71.00 and was then able to recover back up to 71.15. Trading remained very erratic, with July again moving back under 71.00 and then on down to a new low of 70.85. In Chicago Soybeans had opened around unchanged but Corn was under pressure, opening 9 to 10 cents lower and then trading down over 18 cents. Soybeans followed corn and were trading down about 6 to 7 cents lower. Some spillover selling was coming into our market. However, July was able to stabilize at 70.85. July then chopped between 70.85 and 71.00. Just before 11:00AM July moved back over 71.00. In Chicago Soybeans had staged a good recovery and were up about 10 cents on the day. July continued to slowly climb higher trading up to 71.10. About 5 to 10 minutes later another surge of buying hit the screen and rallied July up to 71.75. This level was reached around 11:30AM. July's upward momentum finally stalled at this level and July started to chop lower. Around 12:40PM July had moved down to 70.91. July then chopped mostly between 71.00 and 71.20. Around 1:15PM another pick up in selling pushed July down to 70.89. Like the last time under 71.00, July only spent a few minutes below this level before rebounding back up to 71.13. The 71.00 level held for about 5 minutes. Another wave of selling then pushed July down to a new low of 70.80 (-101). At about the same time, Soybeans jumped about 8 cents higher. Then in less than a minute July jumped back over 71.00 and moved up to 71.12. Around 1:45PM Soybeans staged another dramatic move, trading from about 20 cents higher to 39 cents higher. However, this move in Chicago did not translate into a rally in our market. During the one minute settlement period July chopped mostly between 70.81 and 71.05. After this period ended July managed to tick up to 71.10. The July/Dec straddle traded about 2,019 times, ranging from 857 to 873 points. July’s last tick was at 70.95. July closed weak and near its low, settling at 70.90 (-91). Dec closed 872 points over July, settling at 79.62 (-90). Estimated volume today was 10,600 contracts. Previous day’s volume was 16,449 contracts.
 

Daily Moving Averages:	July	Dec
3 Day Average	71.44	80.12
7 Day Average	70.74	79.28
21 Day Average	72.33	80.70
40 Day Average	73.94	81.52
50 Day Average	75.99	83.02
100 Day Average	74.71	80.44
RSI:	43.2	46.2

 

Contract	High	Low	Previous	Close	Change
July '08	72.00	70.80	71.81	70.90	-91
Oct '08	----	----	77.41	76.52	-89
Dec '08	80.55	79.50	80.52	79.62	-90
Mar '09	84.60	84.01	84.82	84.38	-44
May '09	85.95	85.40	86.17	85.87	-30
July '09	87.15	86.50	87.30	87.09	-21
Oct '09	90.00	90.00	88.10	87.91	-19
Dec '09	88.75	88.00	88.95	88.82	-13
Mar '10	----	----	90.68	90.50	-18
May '10	----	----	91.50	91.32	-18

 

Please address comments to Weil Brothers-Cotton, Inc., at weilbros@weilbros.com.

Additional Market Information, including Cotton Options, can be obtained from The New York Board of Trade.

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