Market Comments – January 18, 2018

History doesn’t necessarily repeat itself, but it often rhymes! Like in 2008, the trade is putting up a fight, matching new spec longs step-by-step with additional shorts, which has led to this historic open interest. At this point the trade remains convinced that the futures market is out of line and that it will sooner or later have to correct back down.

Market Comments – January 4, 2018

The trade has been waiting for a meaningful correction for the last six weeks, but the market hasn’t given back much more than a cent or two a couple of times. This is clearly frustrating the shorts and/or mills who still need to fix a lot of cotton, and over the last couple of sessions we have seen some fixations move up to the market. It is this kind of action along with bullish options strategies that keep feeding this bull market!

Market Comments – December 21, 2017

Speculators led the initial charge of this bull run and now nervous members of the trade are fueling the flames by engaging in bullish strategies in order to protect their short position. The old saying ‘there is no better buyer than a commercial short’ seems to hold true at the moment and it is therefore difficult to gauge at what point this bull market will finally run out of steam and reverse.

Market Comments – November 30, 2017

Over the last couple of years the price of cotton has been closely correlated to the spec net long position. When specs are buying the price is going up and vice versa. The next move will therefore depend on what speculators decide to do. Will they continue to throw money at the cotton market or are they done for now? We’ll have to wait and see!

Market Comments – November 9, 2017

Today’s WASDE report didn’t give the market a reason to break out from its current trading range. On the one hand we still have a sizeable seasonal surplus and an inventory buildup later in the season, but on the other hand mill demand has now risen to a plateau of nearly 120 million bales, which requires continued near-record crop production in the ROW going forward. 

Market Comments – October 26, 2017

The increase of Gujarat’s MSP combined with some potential freeze losses in West Texas this weekend won’t add up to a bullish market, but they may make it a little less bearish. In other words, we may deal with a slightly higher trading range going forward, with March possibly holding near the mid-60s instead of the low-60s. The upside looks limited until we have cleared the extra inventory, which will only start to happen once China enters the scene as a stronger importer. 
 

Market Comments – October 19, 2017

The path of least resistance seems to be down. Crop pressure is starting to build and the technical picture is now pointing lower as well. Mills need to fix a record amount of cotton but will probably take their time and do so on a scale down basis only. This should open the door for a move into the mid-to-low 60s, maybe not for December, but certainly for March. Only a last minute problem in West Texas or India would alter this scenario in our opinion.

Market Comments – September 28, 2017

There is currently a shortage of cotton in the cash channels and the basis for early arrivals is therefore quite strong. Only once the crop has moved in and nearby commitments have been applied will the market start to feel some pressure. This will probably not be the case before the second half of November or early December. We therefore see December futures well supported, while March should eventually start to feel the crop pressure. 

Market Comments – August 31, 2017

Markets don’t like uncertainty and right now there is plenty of it! With an almost empty supply pipeline and with some of the early arrivals falling prey to bad weather, the margin for error has become rather thin. Heavy rain in the Delta at the moment and possibly another storm system bringing more unwelcome moisture next week are likely going to impact the quality of the 4.0 million bales grown in that region.