Market Comments – January 17, 2019

While we feel that the market has solid support at 72-73 cents, we are not quite sure what to make of its upside potential. While today’s break above 74 cents bodes well for a technical rally towards the 7650-7750 resistance area, we doubt that such an advance would be sustainable yet. The US needs to get rid of more low grades over the next couple of months before higher cash prices are warranted, especially in the face of what could be a 20+ million US crop in the making next season.

Market Comments – January 10, 2019

The market actually makes some sense to us at the moment. At 71-72 cents the futures market gets competition from the cash market and therefore doesn’t need to go any lower. However, when it rises to 73-74 cents, like it has been doing a few times since Christmas, the board becomes the top buyer again and therefore attracts selling by the trade.

Market Comments – December 6, 2018

The abundance of lower US qualities and softer financial markets are keeping a lid on cotton at the moment. However, with crops around the globe not living up to their expectations, both in size and quality, there is currently not much price pressure building. We therefore see no reason for the market to leave its current range of roughly 77-82 cents, which it has occupied since mid-September.

Market Comments – November 29, 2018

From a fundamental point of view we see no reason for the market to rally. There is plenty of cotton around at the moment and the fact that we have such a large amount of tenderable 41 style cotton should keep a lid on the market. It would help if China were able to come back into the market to absorb some of these lower qualities, which is why traders are keenly awaiting the outcome of the US-China trade talks at the G-20 meeting this weekend.

Market Comments – November 1, 2018

The market made a nice move off the lows in heavy volume today, but we have seen these flash-in-the-pan rallies before. When we take a step back and look at the chart, we notice that December has settled the last 33 sessions in a fairly tight range of just 402 points, between 76.00 and 80.02. That dates all the way back to September 18.

Market Comments – October 25, 2018

It’s a tough call at the moment, because the cotton market is not really in charge, but relies to a large degree on what happens in the outside markets. Speculators have been selling over 9 million bales net since early June and they may not be done yet. They are probably down to a net long of around 2.5 million bales by now, but the last time we had the threat of a recession, in early 2016, speculators went to a 4.4 million bales net short position and the market traded in the mid-50s.

Market Comments – October 18, 2018

We feel like we are in a bull market with the hand brakes on. There are plenty of reasons to be friendly, but there is this fear that something bad is going to happen on the demand side. It is as if the market was telling us ‘never mind a couple of million bales less production, mill use is going to drop by a lot more than that’. Whether trade wars, emerging market problems and stock market jitters will indeed cut into the demand side remains to be seen, but we’d rather be long than short going into the December notice period at current prices.

Market Comments – October 11, 2018

While the US faces losses and quality problems in the Southeast, which accounts for about a quarter of US output, the global economy is confronted with an emerging market crisis, trade disputes and as of yesterday jittery stock markets. While both developments have the potential to move the market, we feel that fear of lower mill use in the wake of all these economic problems carries the greater weight at this point, especially when it comes to speculators, who seem to turn their backs on industrial commodities.  

Market Comments – September 20, 2018

After we saw some weakness in fundamentals recently, the technical side followed suit this week by crashing through key support. For now it looks like this was just a necessary washout that realigned futures prices with reality. The fact that open interest held relatively steady, export business picked up and that there were still 15 million bales to fix as of last Friday gives us some confidence that the market has simply moved to a lower trading range of somewhere between 76-81 cents, rather than the beginning of a cascade in prices.

Market Comments – September 6, 2018

So where do we go from here? For now there is still plenty of support underpinning the market. The 14.95 million bales in unfixed on-call sales, the Indian MSP (Minimum Support Price) and the 200-day moving average at 80.00 cents act like a dam that holds the market back. However, these emerging market problems are like cracks appearing in this dam and only time will tell whether they can be repaired or whether there will eventually be a breach.

Market Comments – August 30, 2018

The market has very little momentum at this point and given the statistical situation this is not expected to change anytime soon, unless something were to drastically change in the supply/demand outlook. With crops about to come off the fields, supplies should be plentiful for a while and a potentially bullish scenario will probably have to wait until the 2019 planting season.