Cotton prices have just reached the highest level since July 11th. Previously we mentioned that in September China would start creating cotton reserves. Importers are more active, which definitely supports the prices. At the same time the latest reports say that China’s import is going to be less considerable than expected.
The US and Pakistan’s crops are being affected by bad weather conditions, which cannot but worry traders and investors.
Last year’s floods in Pakistan seriously damaged the country’s cotton industry, thus reducing the production (8.8M bales instead of 9.6M bales). This year Pakistan is expected to produce 10.3M bales of cotton. Nevertheless, Pakistan’s ministry of agriculture assumes that the current foods won’t damage the crops as seriously as last year. However, the market is still concerned. The bullish sentiments are supported by the expected damage caused by a series of storms in the USA. The US daily harvest reports show that only 28% of the crops are rated as “good” as opposed to 60% in 2010. This is the poorest data since 1998 (34%).
However, it should be noted that these bullish factors are of local nature and look more like speculations by major market players who are trying to initiate a rally and profit from it in advance of the forthcoming harvesting campaign in the northern hemisphere.
According to the Department of Commodity Trading, , the situation will clarify after the USDA’s September report, which is to come out on Monday.
