The cotton market continued its rapid decline overnight, with a further 4.62 USc drop following the limit move of 4 USc on the December contract the session before. While the trigger for the drop has been attributed to a slightly better outlook for US cotton production from a USDA report released Monday, the size and pace of the move is entirely speculator driven. The initial rally itself was driven by technical factors, with a breakout on the upside of a well-established trading range spurring hedge fund buying, with very little fundamental news present to justify prices above 90 USc/lb. Physical demand has been entirely absent during this rally also, with mills experience with the huge rally and subsequent collapse in futures in 2011 making them more reluctant to chase price movements up. With funds locking in profits with sell stops on the way down and exiting the market, it is expected prices will realign with its pre-rally trading range, with mill buying supporting prices around 80 – 82 USc/lb. The short lived spike in prices has at least given growers the chance to lock in large portions of their 2014 crop at $500+ levels, and clean up remaining stocks at prices which pushed up to $520 over the past few weeks.

Grain futures have continued with their recent volatility, with gains overnight coming close to making up losses experienced yesterday. US weather remains the focus and will remain so for the next few weeks as a tilt drier casts doubt over production estimates. A weaker Aussie dollar is helping support local new crop prices, pushing below 0.90c after spending recent weeks around 0.92c.

Demand for new crop remains strong, with prices Narrabri North at $300 Newcastle track, while Brisbane track is $306. New crop SFW prices ex farm are still strong around $260 ex farm in the North. It is also worth remembering that warehousing fees increase at the end of this month for stocks still in the Graincorp system. We currently have some short term demand for protein wheat in the system in the Western line to Walgett and Northern sites. We are also able to offer new crop barley prices with a floating spread to malting barley which can be locked in at the time of transfer. Please call the office if this is of interest. We also have demand for any parcels of sorghum still available with the capacity to handle borderline moisture, while new crop is also gaining some interest with strong ex farm numbers in the North.