No doubt some of today's strength came from outside markets and technical factors. However, strength in the spot month, considering the close proximity of the delivery period, speaks to the value of the cert stock at a time when Chinese mills (and others) are seeking high grade cotton. In fact, Chinese demand and shortage of better cotton is the basic underlying fundamental.
Technically, cotton was a giant today -an outside range to the upside. The spec/hedge this morning showed that last weeks gains were mostly short covering so the specs are just now beginning to really build a long position - in a period that Chinese mills are scrambling for supplies to last until new crop becomes available.
While mills have tried to resist the recent price rise and most likely fresh export business has been curtailed, the hand-to-mouth buying that has worked so well has now come back to bite them in the butt; like it or not, the offering price of cotton made another jump today. Much like the old oil filter commercials, it is "pay me now, or pay me later". Very possibly the Chinese governments policy of forcing their mills to use domestic stock first has now come back to haunt them.
The US merchandising trade redeemed 7 million bales from the loan and are hedged at much lower levels. As they sell cotton, they too must buy their futures back.