Based on the experience of the previous three seasons, the trade assumes that the futures market is once again overextended and that it sooner or later will have to come down to where foreign growths are selling.
But could it be that the trade has it wrong this time around and that the physical market will ultimately have to play catch up with the futures market and the futures market itself is playing catch up with the outside markets?
What some traders may not appreciate enough is that the cotton market does not exist in a vacuum and that it instead forms part of a much more complex macroeconomic picture that has seen some rather interesting developments recently.
For well over a decade central banks around the globe have accommodated economic growth with cheap credit, which has created bubbles in the stock market, in real estate and in various other tangible assets.