FCStone Annual Outlook Conference: June 15-16, 2011

The 2011 INTL FCStone Outlook Conference focuses on examining supply and demand factors in uencing every major food-related commodity, as well as price in uencers such as interest rates, energy, currencies, governmental legislation and regulations, and global weather patterns.

This year's theme is "The Most Important Subject on Earth," an acknowledgment of the critical importance of food, at a time when political and economic disruptions, rising energy prices and controversial new technologies are bringing food supply and demand issues to the forefront of
the global agenda.

The continuing turmoil in the Middle East — exacerbated at least in part, according to many commentators, by food shortages and rising food prices in the region — will be addressed by the conference's keynote speaker, Shahar Arieli, Deputy Consul General of Israel to the Midwest.
His keynote address will help conference attendees understand what's happening in the region, and how various scenarios are likely to a ect food and energy prices in the months and years ahead.

Representatives from major U.S. and European exchanges will discuss new developments in global risk management tools. The influential market analyst David Hightower, publisher of The Hightower Report, will present his global financial outlook. Hightower, who has been a market analyst for more than a quarter century, is a frequent guest on CNN and Bloomberg TV. David Oppedahl, an economist for the Federal Reserve Bank of Chicago, also will offer a macroeconomic perspective on the U.S. and global economies.

For the full agenda or to register to attend, click here for more: http://www.intlfcstone.com/seminars/outlook/Pages/default.aspx

Weekly Commodity Market Recap: Cotton

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After rocketing ahead in February to its highest point in two years, cotton futures prices retreated last week, falling four of five trading days as the latest WASDE report from the USDA failed to impress and prices responded both to overbought technicals and mounting concerns about the economy. The Nearby finished the week at 80.47 cents per pound, off 1.96 cents from the week before. As we suspected here, the latest USDA forecasts saw global production ease, while U.S. fundamentals were little changed from the previous month, supporting our notion that global drivers would have more of an impact on the market this week than the domestic market. In fact, one could argue that the ‘news’ of a smaller global crop had already been factored into the market, as this information had been widely publicized for some time. Aside from this issue, there were few fundamental surprises in the report to drive price, allowing bearish technicals and outside influences to dictate price for the week.

Weighing negatively on the market this week were several overbought indicators and more worries about the U.S. economy. For example, as prices soared to their two-year high in early March, the RSI signaled the need for a correction. At 77.72, this indicator reached its highest level in 21 months, a few standard deviations away from its long-term 50.0 mean. Economic news last week also weighed on the market. Among other news, weekly U.S. jobless claims for February were higher than expected, and Chinese inflation rose to a sixteen-month high, hinting that tighter monetary policy may stifle rapid consumer demand there later in 2010.

But after four straight losses, prices rebounded on Friday, recouping mid-week losses. Stronger-than-expected February retail sales figures encouraged shorts to cover on Friday, in spite of sagging clothing store sales. A weaker dollar on Friday also fueled speculation of a likely improvement in relatively unimpressive U.S. export sales. Friday’s Commitment of Traders report showed the large specs adding 4,101 longs and 412 shorts to their combined futures and options position in the week ending March 9th, helping spur the improvement in price. Technically, trades formed a ‘bullish engulfing’ pattern on the Japanese candlestick charts. What’s more, Chinese futures prices rebounded Monday, with Nearby ZCE prices reaching 16,295 yuan per ton ($1.08 per pound), close to the ZCE record-high set in early January. This late-week turnaround leaves us believing the market may have found significant near-term support. The longer-term question remains as to how much global cotton acreage will expand this spring, and how much further the bulls will drive the market before bigger crop prospects come into focus this fall.

Weekly Commodity Market Recap: Cotton

for more analysis like this, please click here.

After surging ahead in recent weeks on the outlook for tighter domestic and global fundamentals, cotton prices moderated last week in advance of the USDA’s next WASDE report, easing as technicals turned increasingly overbought. At 84.60 cents per pound, intraday trading last week reached the highest level in two years, following three straight weeks of gains that saw nearby futures soar 17 cents in less than a month. But the market may have overreached—at least for the time being—suggesting prices may consolidate in the short term as attention increasingly turns from tighter old-crop fundamentals to the longer-term outlook for a bigger U.S. and world harvest this autumn.

Wednesday’s WASDE report is likely to show few changes in U.S. old-crop fundamentals, tempering the recent streak of gains in domestic prices. Evidence suggests the U.S. balance sheet only may tighten marginally if at all, while global production is likely to see a more pronounced decline. We have long argued here that India’s harvest size may be overstated, and recent forecasts from China’s NBS here may color the USDA’s projections this week. This suggests global drivers may have more of an impact on the market this week than the domestic market, contrary to the trend reflected over recent months in the graph below.

On balance, futures trading last week was quiet and mostly dull, with traders focusing on the consensus outlook emanating from the International Cotton Association conference in Singapore. After the week’s high was set Monday and the low set Tuesday, trading during the rest of the week remained within that range, with volume well below trend. Presenters’ comments at the ICA meeting were mostly bullish, suggesting that supplies will remain tight through 2010, but likely higher plantings this spring in a number of markets are likely to boost global cotton supplies in 2011, unless crop troubles in China or India cause prices to “explode”. With the global economy on the rebound, increased demand for cotton in the new marketing year is all but certain. As a result, the longer-term outlook for price will be heavily influenced by how much global production rebounds, causing the market now to increasingly turn its attention to pre-plant weather conditions in key markets around the world.

Weekly Commodity Market Recap: Cotton

for more analysis like this, please click here.

ICE U.S. cotton futures rocketed ahead for the second straight week, capping off nine consecutive days of higher closes on the robust outlook for bullish fundamentals in the next marketing year. The nearby soared 440 points for the week to 78.79 by Friday, the highest weekly close since its March 2008 spike. At the 2010 Ag Outlook Forum just outside Washington, DC last week, USDA analysts speculated that bullish fundamentals both in the U.S. and worldwide will persist into the new marketing year. Giving its first peek at a new-crop balance sheet, the USDA looks for global mill demand to outpace production for the fifth straight year, resulting in another decline in ending stocks in 2010/11. This would mean a world stocks-to-use ratio of 41.8%, down from 45.1% estimated for 2009/10 and the lowest since 1994/95, presumably boosting prices next year. Already, the marketing year-to-date average ‘A’ Index price is 75.0 cents per pound, with prices surpassing 83 cents by late February.

Echoing sentiment expressed earlier by others, the USDA believes the U.S. crop is likely to rebound from its lowest level in a quarter century on the outlook for a big jump in plantings and presumed normal yields across the cotton belt. Already, the most year-to-date precipitation in years has fallen around Lubbock here, boosting optimism for higher yields. But higher offtake may absorb the jump in production, leaving domestic ending stocks little changed. This year’s stocks-to-use ratio of 21% is projected to remain about the same in 2010/11, implying prices are likely to remain robust. The USDA projects the marketing year average U.S. price at 64 cents, compared with 62 cents for 2009/10.

While a myopic view of the fundamentals strongly points to even higher prices, we are cautious over the long term, as even higher prices may limit the number of mills able to pay these rates. As most any textile mill will acknowledge, downstream price pressures ensure that the only thing worse than high prices is volatile prices. And this marketing year has been full of both so far, hindering mills’ ability to forward price yarn quotes for remunerative—but still competitive—price points. Since beginning the marketing year at roughly 63 cents per pound, nearby prices are up almost 40% in less than six months. And while market fundamentals may point to continued gains in prices longer term, mills are unlikely to see remunerative prices paid for yarns, impacting both cotton share and viability for many. To avoid this dismal scenario, we encourage you to speak with one of our risk management consultants here to review your exposure to risk and see how we may be able to minimize this exposure for you.

Weekly Commodity Market Recap: Cotton

New York cotton futures finished their third straight week of declines on cues from outside markets, falling to the lowest weekly close in more than two months. This marked the third consecutive week of lower closes, the longest such streak since a four-week losing stretch that ended March 6.

Nearby prices closed Friday at 56.30 cents per pound, hampered by weaker signals from traders and declines in outside markets. First, the weekly Cotton on Call position report from the CFTC showed a decline in total unfixed call sales to 44,188. This came primarily from the most-traded December contract, where unfixed call sales retreated 533 contracts from the previous week’s record high to 17,253.



















Also, the latest spec/hedge report from ICE Futures U.S. added to the glum mood over the market last week. The spec/hedge report for the week ending August 24th showed speculators reduced their net long position from 12.2% to 8.7%. Overall spec longs likely sold their positions to the trade, as spec longs reduced their position by 6,057 contracts to 49,476. Finally, the latest net futures position from the CFTC’s Commitments of Traders report dipped to 24,004 contracts Friday, its lowest weekly close in almost two months. All three gauges substantiate the decline in futures in the latest week.



Outside markets also weighed on cotton prices in recent days. Wheat and corn prices are flirting with multi-month lows, while synthetic fiber prices in China are swooning from near-term highs set a month ago. Nearby wheat futures fell to $4.60 per bushel last week, down each of the last three weeks in step with lower cotton prices. Corn prices fell for the seventh time in the last nine weeks, down to $3.21 per bushel. Even prices of synthetic fiber feedstocks eased in the last week, dampening prices for purified terephthalic acid (PTA) on China’s Zhengzhou Commodities Exchange. Economically speaking, PTA is a substitute good for cotton, meaning fluctuations in prices here tend to mirror changes in cotton prices. As a derivative of oil and an ingredient in polyester production, lower PTA prices point to lower cotton prices. PTA futures dipped for the second straight time last week, down to 7,684 yuan per metric ton (51.0 cents per pound). Despite the lower close in cotton prices this week, we are still friendly to this market, and believe we are near the bottom of our range.

Dirt to Shirt: Linking the Global Fiber & Textile Supply Chain

Perhaps no issue is more integral--or more contentious--to world trade and the welfare of millions of people around the globe than the international fiber and textile supply chain. Whether from feedstock to fabric or from dirt to shirt, over time fortunes have been made and lost, wars fought and settled, and entire economies thrust from an agrarian focus into the modern, industrialized world.

From the fiber--natural or synthetic--through the supply chain to the final retail consumer, we track, interpret, and forecast the evolution and machinations that drive this complex system, so you don't have to. 30 minutes on our site can save you hours of trolling the web. And provide insight behind the data. Across the supply chain, we encounter questions like the following:

"Is it going to rain in Uzbekistan this weekend and how might this affect development of the cotton crop?"
"How will OPEC actions drive crude oil and feedstock prices?"
"When does a change in the euro impact fiber prices or textile trade patterns?"
"How much do changes in GDP affect consumer spending on apparel?"
"What will the new administration mean for textile trade policy?"

.... We address all these issues and more, every day. Globally.
Curious? Whether you are looking for a quick tidbit of insight into the markets, or need big help with one of our consultants, come give us a look at www.globecotnews.com and see for yourself how we can help provide you with business intelligence for an interwoven world.