wmeubank@ocp.kcmo.com
PRUDENTIAL SECURITIES, INC.
One New York Plaza, New York, New York
(September 29, 1997) COTTON: Bears sure have to go home today with smiles on their faces. They dodged a bullet named Nora and excessive rains in the Southeast. Obviously, and for the most part, traders did not buy into the weather being much of a factor for unharvested cotton. The December delivery was down 4 out of 5 days, vanquishing Tuesday's big up-day by the close of business today. No doubt new contract lows and the loss of 273 points this week in the expiring October contract was a big help. Even with the steep discount to December, October had no friends.
However, now that all the smoke has cleared, it wasn't a particularly convincing victory–it was not a one-sided trading week. It took some doing to post losses across the board. December lost only 19 points since last Friday, March gave up 24, May 20 and July just 5 points.
New-crop December fared pretty well in the scheme of things. It lost all of 9 points, underpinned by ideas of reduced acreage next season and only a modest amount of beginning stocks.
The unsettled weather across the U.S. belt has some of our friends anxiously awaiting Monday's Crop Condition report. Traditional cotton areas were reportedly in good shape although later than ever. Acreage in the Southeast is expected to suffer the most with almost as much puzzlement about eventual outturn as we usually find in Texas.
ICAC did not make many substantive changes to the S/D from last month. The bulk of the revisions were centered around the U.S. balance sheet.
A quick look at December's daily chart shows that since August 26, or the last 23 days, prices have traded 73 cents or less 16 times. So far, one would have to say that the market does not like being there for very long.
Fundamentally, we can justify fresh contract lows to build a better demand base but it still feels as if supply is not yet assured enough to press the issue substantially lower.
Rich Cantor
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