Cotton commentary for week beginning today

18 Jun '07

3 min read

Last week started off in mundane fashion as the USDA reports offered no surprises and certainly no forewarning of what the market was about to experience. in fact, up until Wednesday, although showing net gains, the market had failed to close in the same direction two days running for the previous eight sessions.

Cotton prices blew through the roof the last half of the week when technical indicators came into agreement with the perception of bullish fundamental news. Prices posted Friday were the highest in ten weeks. July gained 350 points this week while December cotton rose 253 points for the period.

Volume expanded also. In fact, total combined volume of futures and options exceeded 100,000 for the first time Thursday. Electronic trading set a new record the same day with 33,372 lots changing hands; far exceeding the previous record of 26,038.

A number of speculative advisory services have been warning of cotton potential for several months and it would certainly seem they were warranted. In the last month prices have literally catapulted to the high end of the trading range in effect since April 2005.

After trading rather uneventfully following the USDA Supply/Demand and WASDE reports, prices took off on Wednesday and never looked back. Traders took note of the unusually big overnight jump in the CCIndex Wednesday morning.

This index is determined by offering prices of cotton to Chinese mills. Additionally, while there was no official statement out of China concerning the import quotas, US commercials believe they have been issued.

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