NY cotton futures move sideways this week

There has been a lot of talk about Chinese cancellations in recent weeks, but before getting too worried we should realize that outstanding sales to China amount to a mere 549’300 running bales. In other words, even if China were to cancel another 200’000 bales, it wouldn’t be a game changer considering how tight the US balance sheet currently is.

 

It was a rollercoaster week in the futures market, as May traded in a 432-point range between 90.44 and 86.12 cents before ending the reporting period#

Unfixed on-call sales finally made some progress this week, as the remaining 1.1 million bales in March got squared away. However, since May and July continued to see an increase in their unfixed on-call sales, the remaining balance of 4.77 million bales for May and July combined is still worrisome. By comparison, a year ago unfixed on-call in current crop amounted to just 3.2 million bales. 

 

It was a rollercoaster week in the futures market, as May traded in a 432-point range between 90.44 and 86.12 cents before ending the reporting period#

So where do we go from here? The break below the uptrend line has done some technical damage and the market may therefore have to move sideways for a while and regroup before attempting another rally to new highs. Judging a) by the current open interest in May and July, which at a combined 135’000 contracts is only about 1’000 contracts less than a week ago, and b) by the latest CFTC report, which showed that the trade net short position increased from 10.4 to 10.9 million bales, we can surmise that the trade hasn’t made much progress in reducing its short exposure and therefore remains vulnerable to a squeeze. 

 

It was a rollercoaster week in the futures market, as May traded in a 432-point range between 90.44 and 86.12 cents before ending the reporting period#

At the moment the trade seems to be stalling for time, hoping that the problem will somehow disappear, but the clock is ticking and we don’t see an easy way out. Not with a 900-point inversion to new crop!

 

It was a rollercoaster week in the futures market, as May traded in a 432-point range between 90.44 and 86.12 cents before ending the reporting period#