ICE Cotton Futures market pulls back below 90 cents

21 Jun '14

2 min read

Oops, we did it again. Another solid USDA export report and the market tanked. The beginning of the week the market was on a tear to the upside but the market reaction to this “bullish” report turned the fundamentals on their head once again.

July/Dec crossed the 1400 level, which seemed to be the signal some traders needed to exit. And exit they did, causing a chain reaction to the downside. It didn’t wipe out all the gains for the week but it did pull the market back below 90 cents. With the day’s close at 88.16 the market closed up 116 points.

We are starting to see some interesting action with the cert stocks. Someone offered over 10,000 bales of cert quality cotton on the Seam Thursday only to pull it later in the day. In fact, offers on the Seam fell as the day progressed, not due to sales but as the owners pulled them. So what does this mean for the cert stock? If there are cert quality bales floating around the market, can a merchant or two, justify taking the cert? Will an owner of the cert cotton decide to decert a large volume right before the notice period just to add an extra kink in the market as they play? The notice period could get exciting.

West Texas storms have been great for the dryland yields but the flipside has been damage to some irrigated field due to hail and wind. Irrigated abandonment along with better yields on the dryland have changed the makeup of the WTX crop, causing crop estimates to be adjusted (not so subtle hint to the USDA – change to your crop estimate). Hopefully the next few storms only come with liquid H2O and less blowing N2, O2, Ar (aka air), and dust.

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