A.G. EDWARDS & SONS, INC.
One North Jefferson, St. Louis, Missouri
314-955-3050
(March 23, 2000) COTTON: Much of the recent action in the cotton market has been dictated by changing weather perceptions. Before the government's drought forecast, old-crop futures were gaining considerable ground on new-crop futures, trading at a premium for the first time since last June. Drought concerns were not absent beforehand, but what the government's forecast did do was to touch a nerve in the speculative community regarding their outlook for the new crop. This was evident in the quick turnaround in the July-December (old-crop/new-crop) spread. The peak came on March 10, a few days after the NWS released their well publicized drought forecast.
July +/- December Cotton
A shift to a wetter pattern of late has been instrumental in pressuring cotton prices off their highs. Several storm systems have helped to alleviate the parched soils of the Delta, Southeast. On Wednesday, the first substantial rains in a long time were reported in the key cotton producing counties in eest Texas. In areas surrounding Lubbock, Texas general rains of 1 to 2 inches were reported. This in addition to the first drop in the A index in three months proved to be too enticing for the bears to pass up. We are optimistic however, that this demand-led rally is not yet over. We would consider pullbacks to 58-60 cents basis July futures to be buying opportunities.
Andrew Buderus