In December, Cotton Will Oscillate In The Range Of &Nbsp;

　 This week New York cotton showed defensive posture, dropping 2.27 points in December to 76.45 cents.

This week, we saw a familiar pattern, and new economic worries prompted the hedge fund to give up some of its positions again. However, this trader's mood is definitely more negative than last time. The key support of the S&P 500 index has been broken. The economic news is quite worrying, especially the real estate news.

Even though cotton is basically sold out in the current year, inventory is the smallest inventory in many years at the end of this year, but the July contract is unable to exceed 87.10 of April's 26. Cent High point, December contract has not yet broken the psychological defense line of 80 cents. In fact, the closing price of the December contract is only 24 points higher than that at the end of 2009, which is only 85 cents higher than the spot delivery price at that time. There have been so many positive factors since the end of 2009, but why is the development of the market so small?

Perhaps the most logical explanation is: 1; futures 1; the name of the market is one reason, because futures Its role is to discount future expectations. In other words, 6 months ago, the market might be tight because of the expected supply. Rise Thus, it has eliminated the factors that are now becoming reality. In addition, as an early warning system, futures allow market participants to take preventive measures to avoid trouble. Textile mills must ensure that the cotton they need is purchased ahead of time, and many cotton is bought through an inexpensive way. These buyers are ultimately lucky because they make pricing decisions during a large number of speculative long positions, which prevents bullets from being squeezed.

From the same logic point of view, from now to the next few months, the current market may be in a discounted process. The outlook for us cotton output is promising, probably higher than the US Department of agriculture's estimated output of about 2 million packs, and the economic outlook for the rest of this year will be bleak. Therefore, trade may be sold near 80 cents, but on the other hand, the market is short of buyers. A few weeks ago, speculators were still building a net long position to provide the necessary liquidity to push the market closer to 80 cents.

However, as the stock market and economic data become disappointing, they turn into a net seller, which means that there will be no buying anywhere near 80 cents. Therefore, due to the lack of new support energy, the market has been declining. It seems that trade has finally emerged as a net buyer near 75/76 cents, because the prices of growers at these prices have been shrinking, textile mills' pricing purchases and short sellers' compensation have begun to emerge. Whether trade buying is enough to prevent speculators from shorting is still to be seen. External market performance will play a major role in the coming weeks. Tomorrow's unemployment rate report may set a tone for these issues.

Although the market is weak now, we believe that the bull market factor still exists because we are entering the next year. When new cotton enters the market, inventory will basically dry up, and the situation in the US and China is more obvious. The US cotton export sales weekly is excellent again, with a sales volume of more than 400 thousand bales. If we calculate correctly, the supply that has not yet been sold this year must have dropped to several hundred thousand bags. So far this year, the total sales volume has reached 13 million 700 thousand statistics package, of which 10 million 600 thousand packages have been shipped. Next year's Export Commission is currently about 2 million 500 thousand statistical package.

China seems to be trying to curb soaring domestic prices. China has agreed to put 600 thousand tons of its national cotton reserves into the market, and the remaining national cotton reserves are estimated at only 1 million 200 thousand tons. This year, the number of cotton auction has totaled about 3 million 200 thousand tons. Since the Chinese government is unwilling to see that strategic cotton reserves have been reduced to a single month for domestic textile mills, China will surely replenish strategic cotton reserves once it gets the chance. This is almost a foregone conclusion. In other words, we expect that next year, the Chinese government may purchase 2 million tons of cotton from domestic and foreign markets. Once the market is likely to fall, the Chinese government's approach will provide strong support for the market.

So what do we do now? This week, the US Department of Agriculture announced the cotton planting area, and the market began to focus on the potential cotton output in the United States. We expect that the US Department of agriculture's supply and demand report released next week will show that the output is about 17 million 500 thousand packs, reflecting the expansion of the planting area and the increase of the potential yield per unit area. Cotton production in other parts of the world should also have a small net increase. If that's right, higher production and economic instability will give speculators the chance to buy now, which means that the market needs trade to support one side.

However, because trade is mainly buying at bargain prices, we believe that when new and old cotton is alternately, there is no new energy to push the market into full strength. As mentioned in last week's report, there will be ample market supply in the fourth quarter of this year and the first quarter of next year. There will be no shortage of market supply until the two quarter of 2011 and the three quarter. Although the market is a forward-looking mechanism, we doubt whether it can see the situation after 6 months, perhaps only a few smart businessmen can see it. To this end, we anticipate that in the foreseeable future, cotton will be subject to an interval of 75-80 cents in December.