However, since we need to account for export sales and domestic mill consumption between August and October of probably a million bales each, the amount available for sale may actually be down to the last 200’000 bales. For this reason we believe that the certified stock is spoken for and that either its current owners or new takers will need it to ship against existing commitments. In other words, we believe that basically all current crop cotton, including the certified stock, will be shipped or consumed by the time new crop is being harvested. 

 

The July/Dec spread was at the center of the market's attention this week, as the inversion traded in volatile fashion between 800 and 1400 points. #

So where do we go from here? Given its still large open interest, July may still hold some surprises in store as it approaches First Notice Day next Tuesday. We believe that there will be a strong taker or two, which could get some of the remaining shorts in trouble. 

 

The July/Dec spread was at the center of the market's attention this week, as the inversion traded in volatile fashion between 800 and 1400 points. #

December has found an area of support near 77 cents, which it has held for nearly four weeks now. For Dec to move lower, the forward A-index (84.45 cents) would have to drop first, but given the tight supply situation it may take some time for additional pressure to materialize. Let’s not forget that the current A-index (93.70 cents) is quoted nearly 17 higher than December and even with July out of the way, cash prices for nearby shipment are expected to remain relatively firm over the coming months. If the crops come in as expected, new crop values may eventually move lower, but it is all a matter of timing. We therefore feel that December will trade in a relatively narrow window between 76 and 79 cents in the foreseeable future.

 

The July/Dec spread was at the center of the market's attention this week, as the inversion traded in volatile fashion between 800 and 1400 points. #