Time To Cotton On
By Jonathan Barratt
Cotton has had a really turbulent time over of the last 24 months and so have the producers who at some stage have been producing the commodity at a loss. Cotton has had a high of US219 (March 2011) and low of US69.10 (June2012) and more recently hit US69.50 in November. The market over the last week has bounced off significant support at US69.50 and with it now trading at US81.00 we feel that a low of importance has been made, or rather the range of US219 to US66.50 has been confirmed. For those that have been reading the Bulletin for a while we have been long cotton (Ticker LCTO) and with the trade close to being breakeven it is worthwhile revisiting the market and new developments. On the trade our timing was off, however the choice of product was correct, as we have been able to hold on. In this Bulletin we will refocus on the fundamental and technical side to the market, which will hopefully confirm our feeling that a low is in place and it is ripe for the "picking".
The cotton market, like most commodities, is subject to the rigors of supply and demand. The main producers (in 000's metric tons) are China 6 641, India 5,530 and US at 3,942. When it comes to consumption China is the largest at 10,015, then India at 4,355 and Pakistan at 2,323.
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