The weather problems in China and India — along with those in Pakistan, which has been hit with devastating floods — have the market in a near panic. There have been unwanted rains in both India and China and, now, possible frost in a northern (cotton-growing) Chinese province.
For the most part, the United States “has an early cotton crop everywhere,” said Cleveland. “It should get into the pipeline quicker than it usually does. That could slow (the market) down, but the other factors tend to support the market and push for (prices) more than $1.”
All in all, “we have very — and emphasize very— strong prices well into 2011. Textile margins have become very tight but spinners still report good business. Yarn mills are very active.”
For the U.S. consumer, the price of textile goods at the retail level continues to drop.
“I think we’ll see consumers remaining very active in purchasing textile and cotton-rich goods,” said Cleveland. “It’s very interesting to see the textile mill margins tightening at the same time retail prices are dropping. There’s a squeeze on the yarn mills.”
Stevens, too, finds the market intriguing. “Technically, we’re over-bought. But we’re heading higher on a lack of resistance. If you look at the lack of volume each morning, we’re up 100 to 150 points on almost no volume, at all. Buyers have to bid prices up to find a seller.
“For now, we’re pretty much on a one-way street with no sign of a top. Until we can close below a previous day’s low, you can’t even make the buyers nervous. To even hint at a possible near-term top, the market needs to actually close below last week’s low. That’s now at 90 cents — and we’re 400 points above that.”
From a technical point of view, Stevens sees nothing “to keep the market from going well over $1. Of course, sooner or later, we’ll get a sell-off. However, there should be excellent support for any sell-off into the 88-cent to 86-cent area.
“The only way mills have been able to buy anything and live with it is they’ve been buying cotton on call and will fix the prices later. They know, sooner or later, we’ll get a sell-off.”