Market Comments – July 19, 2018

The low volume shows that the major players remain sidelined for now. After last week’s rebound speculators have no reason to abandon their long position, while trade shorts are patiently waiting for a break in prices. Until something changes the status quo, we anticipate more of the same boring sideways action. Support seems to have moved up to around 84/85 cents, while resistance is at around 89/90 cents. Expect the market to trade within these boundaries in the foreseeable future! 

Market Comments – July 12, 2018

The old adage to “never short a dull market” proved once again to be true . The market has held crucial support near 82 cents and then started to lift off. This means that the spec long, which still measured 9.0 million bales net as of last week, is likely to increase again. Meanwhile trade shorts are kicking themselves for letting another opportunity pass by and some traders are starting to fear this market.

Market Comments – June 21, 2018

The fact that open interest has remained so stubbornly high during this break could mean two things: 1) Either massive spec net long liquidation still lies ahead of us, which could force the market substantially lower from here, or 2) Specs as well as outright trade longs are giving the market a lot more rope than we thought, which could eventually swing the pendulum back the other way, as fixations and trade shorts begin to pay up. There are currently 14.13 million bales in unfixed on-call sales on the books for December onwards!

Market Comments – May 31, 2018

The market’s narrative seems to be that while some July shorts might still get squeezed, this isn’t really about July anymore, but rather a shift towards a more bullish market environment in 2019. China will eventually run out of reserve stocks and is therefore expected to increase its imports considerably. Combine this with some problems on the production side, strong downstream demand and an inflationary outlook, and we have the pieces to a bullish puzzle.

Market Comments – May 17, 2018

The market is still caught between a large spec net long position and a sizeable trade net short position, with neither side ready to blink just yet.  However, as already mentioned, over the next 3-4 weeks mills will have to fix nearly five million bales on July, which has the potential to put upward pressure on the market.

Market Comments – May 10, 2018

Although the technical picture is flashing some warning signs, not much has changed in the standoff between spec longs and trade shorts. Today’s on-call report showed that as of last Friday there were still 5.51 million bales unfixed on July, down just 0.05 million from the week before. Mills are apparently still hoping for specs to cut and run, similar to what happened in mid-May last year.

Market Comments – April 26, 2018

From here, we could potentially go a lot higher, unless something were to shock spec longs into abandoning their positions again like last season. But the odds for this to happen are much smaller this time around and the current set up looks ripe for a short squeeze. The bulls may have to be patient as the standoff between spec longs and trade shorts might continue for a few more weeks, but we feel that the trade shorts will ultimately be on the run.

Market Comments – April 19, 2018

Assuming that speculators are not going to bail out of their net long anytime soon given the more optimistic outlook for commodities, it is difficult to envision how mills will escape their fixation trap. Similar to what happened last season, mills have been kicking the can down the road, but they are now reaching a dead end since rolling to December is not a realistic option.

Market Comments – April 5, 2018

Although the market was able to let off some steam during Wednesday’s break, meaning that mills were able to get some fixations squared away, the dynamics as such haven’t changed. Specs are still around 7.5-8.0 million bales net long and mills still need to fix around 6.0-6.5 million bales. In order for the mills to get out of their positions, they need specs to sell, otherwise prices will eventually be forced higher.

Market Comments – March 8, 2018

Trade shorts seem to be in trouble, because the chart looks strong and fundamentals are supportive as well in view of the strong export performance. Speculators are bullish and have room to add to their net long position, which is still 2-3 million bales shy of its previous peak, while the trade needs to buy back a sizeable portion of its net short over the next three months. Who is going to provide the selling?