NY Cotton Futures continue to tumble this week

However, if a bumper crop in the US were to add two million bales to the ROW production surplus and if Chinese imports were to slow down more than anticipated due to internal price pressure, then we could suddenly find ourselves in a more ample ROW stock situation next season and this is what the market is getting worried about. So far this is all conjecture and while these worries may ultimately be justified, we feel that the market has overreacted in response to these Texas rains.

 

Futures prices continued to tumble this week, as negative fundamental and technical factors exerted additional downward pressure on the market. #

So where do we go from here? There is little doubt that we are at the beginning of a transitioning process in China, but we feel that it may not happen quite as fast as the market anticipates. ROW stocks are extremely tight at the moment and this situation will only get worse until new crop cotton finally brings relief, which won’t be until November. This makes it dangerous to be short July, as well as December, especially at these lower price levels. March is a different story, but only if the crops materialize as expected. In other words, a lot needs to go right over the coming months to justify the pessimistic outlook that currently prevails. 

 

Futures prices continued to tumble this week, as negative fundamental and technical factors exerted additional downward pressure on the market. #

Technically the market looks ‘oversold’ and July has formed a bullish reversal pattern on the candlestick chart. Given the nearly ‘sold out’ situation in the US, we wouldn’t be surprised if potential takers had stepped in on this dip to 84 cents. We therefore don’t like the short side at these levels and would advise mills to fix their remaining on-call sales before the market changes its mind.

 

Futures prices continued to tumble this week, as negative fundamental and technical factors exerted additional downward pressure on the market. #