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NY Cotton Futures show mixed trends this week
May '14
After closing at a 26-month high of 94.75 cents earlier this week, the July contract wasn’t able to maintain enough upside momentum to keep this breakout attempt going and was eventually forced to pull back into the 90 to 94 cents range, where it has spent most of its time trading since early March. 
What’s remarkable is that open interest in the spot month has continued to increase, even though there are only about 6-1/2 weeks left until July enters its notice period. There are currently over 122’000 contracts still open in July, more than in any of the previous five seasons at this date. Obviously neither spec longs nor trade shorts are inclined to exit their positions at this point, although considering how little US cotton remains available, the specs seem to hold the stronger hand in this game.
The trade is obviously trying to force the market down, be it by using the certified stock as a deterrent or by spreading rumors about impending export cancellations. While the certified stock may ultimately be able to collapse the inversion between July and December, unfortunately most of the current shorts won’t be around to benefit from it. Traders won’t know until the notice period whether the certified stock is actually going to be in play or not, and by then nearly all of the 12.2 million bales in open interest will already have been liquidated.
Rumors of US export sales cancellations proved to be just that, as last week’s export sales handily beat expectations with net new sales of 66’900 running bales for May/July shipment and another 152’500 running bales for August onwards. Shipments were once again strong at 227’200 running bales, thereby lowering the amount of outstanding commitments to just 1.68 million bales. We still maintain that we won’t see any significant cancellations in the weeks ahead based on whom these remaining commitments are owed to!
Export commitments for the current marketing year now amount to 10.2 million statistical bales, of which 8.4 million bales have so far been shipped. Commitments for the 2014/15-season are at 1.75 million statistical bales and we believe that at least 1.0 million bales of these sales will be supplied from existing inventories. In total we estimate that around 15.8 million bales in export and domestic commitments will be supplied from the 16.8 million bales that were available this season, leaving just some 1.0 million bales for sale at this point, including the 0.4 million bales of certified stock. This is definitely one of the tightest US balance sheets we can remember!

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