Expert Comment: The Output Of The World's Super Long Staple Cotton Will Drop Sharply.

New York cotton: after a sharp fall in July 7th, the second day market was sharply oscillating. In December, 08 years, the contract oscillations ranged from 70.86 cents to 75.33 cents.

At the same time, other soft commodities are under pressure. Crude oil dropped from $147 per barrel to $130 per barrel on Friday.

Good news is that India's rainy season is fragmentary, and its textile factories are active in the international market.

A week's net export sales volume is very large, reaching 341000 packs, because the textile factory last week took advantage of the decline in the price of New York cotton.

Although sales have improved, but due to many external factors, New York cotton market has not made a positive response, but from a fundamental point of view, the main reasons include the United States cotton inventory of more than 10 million packages.

At the same time, the US cotton has no major weather concerns, and the long-term US export sales volume is very low. Now there are only 1 million 300 thousand packages, and New York /ICE cotton registered inventory exceeds 1 million 700 thousand bags.

2008/09 American cotton: cotton picking in southern Dezhou has just begun.

There are sporadic precipitation in most parts of cotton growing belt at the beginning of next week and early next week.

The western part of Dezhou has a large range of precipitation, but little precipitation, and cotton is benefited.

The United States Department of agriculture's drought monitoring report on Tuesday showed that the abnormal drought in cotton fields turned to normal.

Overall, American cotton grew better this week. The proportion of good to excellent grades increased by 1% to 46%, but still lagged behind 55% last year.

The buds rate of cotton is 71%, lower than the five year average value of 74%, and the fruit making rate is 27%.

The average of five years is 31%.

Super Long Cotton (ELS): the price of ELS cotton has gone up since the price of Egyptian Giza 88 increased by 20% in mid December.

The United States increased the price of Pima cotton by 26%, and Egypt Giza 86 raised the price by 43%.

Over the same period, the spread between the Cotlook A index and Giza 86 expanded to 18.85 cents per pound (or higher than the A index 28%) to 47.25 cents per pound (equivalent to 61% over the A index).

Observing the recent price trend, the Giza 86 price is 61% higher, but this is not an attractive proportion. For example, in November 2005, the price increase was 75 cents per pound, equivalent to 130%.

Many people do not understand that the December 2007 contract, which was a record low in price, suddenly changed, and the current price is running high.

Look at the supply and demand side of ELS. This situation will not change very quickly. The price difference between ELS cotton and A index is expected to widen.

Most experts expect cotton production in Egypt to be about 130000 tons in 2008/09.

By comparison, last year was 225000 tons.

In 2008/09, Egypt only planted two kinds of export cotton, Giza 86 and Giza 88.

The output of Giza 86 is about 80000-85000 tons, with a reduction of nearly 50000 tons.

The initial estimate of Giza 88 production is roughly 20000 tons, compared with 37000 tons in 2007/08.

Last year, the stock pferred to 2008/09 was basically zero.

The Egyptian textile industry had to expand the import of continental cotton in order to set aside some sources for exports.

At present, we believe that the import volume may exceed 120000 tons, and about 50000-60000 tons of Giza 86 and Giza 88 cotton can be kept as export cotton sources.

This is the smallest export volume in more than 10 years, compared with 135000 tons in 2007/08.

Other ELS cotton can not make up for the gap created by Egypt.

Some experts in the United States estimate that the national production of Pima cotton may be less than 400000 bales.

Even if the final output is slightly higher, this is the smallest yield in history, compared with 2007/08 production of 850000 bales.

The export volume of 2008/09 decreased sharply, because there was no carry over inventory at the beginning of last year.

In China, the situation of ELS cotton has not improved.

Most experts expect an average reduction of 30% to 40%.

Chinese textile mills have to expand imports again in 2008/09, and the supply and demand situation will become more intense.

In Central Asia, ELS planting has also been hit hard.

The output of 2007/08 is 47000 tons, less than 25000 tons in 2008/09, and 47% reduction in production.

The situation in Israel is also bad. In 2008/09, the output of Pima cotton is expected to be about 5000 tons, compared with 17000 tons last year.

Outlook: 08 years, 12 contracts may continue to oscillate at 71.00-75.00 cents.

However, the net position of speculators is almost no increase or decrease, and the technical signals are neutral, so there may be great turbulence in the market.

American cotton fundamentals and New York cotton short lines are hard to strengthen, but their fate will depend on the trend of oil.