The Chinese reserve continues to accumulate cotton at break-neck pace, including what was almost certainly the largest ever one-off purchase of cotton, today, on December 21st 2012: 380,000 tons of domestic cotton, for which the reserve paid roughly $1.2 Billion USD. Cotton futures managed to finish higher for both the day and week and remain in a rising channel since hitting a low of 69.79 on November 8th.
While futures’ strength has put noticeable pressure on the physical basis, multiple factors have proven constructive: consistently US strong export sales; the de-cert of much of the cotton tendered against the December contract; a friendly technical set-up that has attracted some specs back to the long side of the market; ideas that the worst has already been factored into S&D estimates; stronger yarn prices and healthy hand-to-mouth demand in much of Asia and the subcontinent; and the fact that merchants are only likely to sell futures into a rising, not falling, market.
Cotton futures managed to finish higher for both the day and week and remain in a rising channel since hitting a low of 69.79 on November 8th#
A possible release of import quota in combination with reserve re-sales could also have a positive impact, although going forward policy for the 13/14 season remains a big question the market will have to grapple with in Q1 and Q2 2013 as well.
Cotton futures managed to finish higher for both the day and week and remain in a rising channel since hitting a low of 69.79 on November 8th#
ECOM USA
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