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Rally in cotton quite impressive
Jan '08
NY futures continued to rally over the holiday period, as March gained 254 points to close at 68.71 cents, while December'08 advanced 266 points to close at 76.46 cents.

The New Year started with a bang for commodities, as a flood of new investment money poured into commodities and lifted the CRB index to an all-time high of 368.61 in the last two sessions, nearly 2% above its previous record. The rally was broad-based, with most commodities benefiting to some degree from this ongoing asset-allocation shift.

Yesterday's rally in cotton was quite impressive, not only because there was plenty of volume behind it at 36'000 futures and 24'000 options, but also because open interest jumped an astonishing 10'137 contracts to 24.2 mio bales.

This means that open interest is once again closing in on its record level of 25.1 mio bales set on November 8. By comparison, open interest a year ago amounted to 'just' 17.0 mio bales.

Speculative buying has clearly been the driving force behind this four-week rally from 63.00 to 69.00 cents and in the process outright spec longs have increased their holdings by about 2.0 mio bales to 12.0 mio bales as of last Friday, while spec shorts have covered around 1.3 mio bales over the last three weeks and are now just around 6.1 mio bales short.

The resulting 5.9 mio bales spec net long position amounted to 25.5 percent of open interest and leaves a lot of room to grow if we go by historical standards.

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