July 15, 2007	Sunday	Jamadi-us-Sani 29, 1428

NEW YORK, July 14: Cotton experts expect US futures prices to extend their recent run to multiyear highs, but a variety of factors, from supply overhang to sketchy data from China, should halt their advance and send prices downward by 10 to 15 cents by the end of the year.

Experts vary on the timing and the reasons, but most of the panelists at this year's Cotton Forum at the NYBOT agreed that prices cannot continue their current rally for long.

Trees don't grow to the skies and this thing won't either.

I think we're going to start trending lower between now and the (USDA's) August (supply/demand) crop report, said Mike Stevens, broker at Swiss Financial Services in Louisiana.

He cautioned that the benchmark December cotton contract, which makes up 75 percent of the futures market, has the largest open interest of any cotton contract in history.

As a result, a sell-off, could be fast and furious. You could get some shock downturns in this thing. If you don't get the support we've seen lately, the market is going to continue on down, said Stevens.

The New York Board of Trade's key December cotton contract charged up 1.33 cents to close Friday at 68.38 cents a lb, its highest contract close on record. Earlier, it surged to a peak dating back to early March 2004 at 68.70 cents. Cotton has surged nearly 18 cents since it hit a two-year low in May.

Some forecasters cited a retracement to the 60-61 cent zone, while others took a slightly more bearish view that would take prices down to the 50s.

Jarral Neeper, vice president of marketing at Calcot Ltd., said he saw a 60 to 70 cent range between now and the time the December contract goes off the board.

I'm not terribly bullish on the 2007/08 crop year. Maybe we see a high of 72 to 73 cents on the nearby contract as we work our way through the season. We have a lot to work through the system with the (cotton) carryover going forward, he said.

Joe Nicosia, CEO of cotton trader Allenberg Cotton, said he sees weakness in the nearby contracts, but little weakness further out on the time horizon.

I think it will take another 30 days before we see it. In the short term, I think prices will move down one (cent), (move up) two.

But then I think we'll see a slow erosion in the front end maybe to the low 60s. If the crop is really big, maybe even down to the high 50s he said.

Prices have been driven higher by a trend to convert cotton acres into more expensive crops like corn and soybeans, especially with a push to turn grains into ethanol for fuel.

While some of that conversion began with the 2007/08 crop, many experts are predicting the trend will continue next year, driving the December 2008 contract up even further.

If you want to see where cotton's going longer-term you have to get corn right. Because this whole agricultural revolution's been driven by the ethanol regime of taking land and converting it for fuel, said Nicosia.

Predictions for December 2008 cotton led up to the high 70s and possibly higher as a price that would be needed to draw growers back to cotton from other crops.

I think we're getting near the top end. We've had a significant increase. But if growers are looking for $1,200 (revenue per acre) equity to bring them back in, that would probably get Dec 08 up to 75 or 77 or 78 cents, said O.A.—Reuters