Cotton is a member of the Soft Commodities sector and is one of the more volatile commodities in its group. Weather conditions in producing countries, along with supply and demand are the main drivers behind the volatility. Since the coronavirus pandemic, demand has evaporated as factories and outlets cease to work and the ongoing feud between the U.S. and China isn't helping matters for the lightweight fibre.
As the US Dollar continues to show signs of further weakening, we could expect to see commodities such as Cotton consolidate around these current levels or perhaps rise for the medium term. As of today, the Cotton index is currently trading at 63.84 per pound.
Commercial hedgers are currently short 102,907 contracts a change of -4,653 contracts from the week prior, 1,309 contracts were added to their bullish exposure this week totalling 25,386 contracts.
Non-Reportables (aka small participants) are holding 15,703 contracts long and 3,460 short, an increase of 363 contracts from the week prior.
What happens at (1) could pave the way for the short-medium term.
