APRIL 17, 2020

TRADERS CLOSE MAY POSITIONS DURING SHORT TRADING WEEK

• Rate of New COVID-19 Cases Steady or Declining in Most of Developed World
• Export Sales Report Shows Increased Cancellations
• First Notice Day for May Futures Approaching

It was a shorter week with the Exchange closed last Friday in observance of Good Friday, and the market seemed content to take a break from its wild price swings in the latter half of the week. Monday’s trading was the most volatile, with prices falling sharply from the week’s high at 54.55 cents per pound. Prices continued to decline Tuesday until finding support at the week’s low of 51.91 cents. From there, May futures traded in a choppy sideways pattern and eventually settled at 52.79 cents, down 158 points from last Thursday. Open interest also continued to fall rapidly as traders closed May positions. The total number of open futures contracts fell 5,196 contracts to just 184,816.

OUTSIDE MARKETS

Outside markets seemed to calm down this week, with major stock indices moving sideways in fairly choppy trade. The rate of new COVID-19 cases has been steady or declining in most of the developed world and attention is turning to how and when quarantines should end. Governments and central banks continued to shore up problematic areas in their initial aid packages. Markets are likely to cheer the expanded funding that will come to successful programs as well as the more finely tuned aid that will target critical areas left out of the first tranches of support.

EXPORT SALES

Gross new sales for 2019/20 marketing year were 148,600 bales, but cancellations were much larger at 332,400, leaving a net reduction in sales of 183,800 bales. The largest net cancellations were from Vietnam (138,700 bales) and China (82,000). Sales for next marketing year were also fairly low at 71,800 bales. Shipments remained a relatively bright spot at 330,800 bales reported exported last week.

THE WEEK AHEAD

May futures are winding down ahead of their first notice day (when sellers can declare their intent to deliver against the contract) on April 24. Traders wishing to avoid taking delivery of physical cotton need to have closed positions by the end of trading on Thursday. Whether any merchant makes or takes delivery will be carefully watched. Besides the results of May futures delivery, Monday Crop Progress reports are working their way back into traders’ attention. Of course, outside market activity is likely to continue swaying cotton prices, but next week’s Export Sales Report will be central for traders to gauge demand.

IN THE WEEK AHEAD:

• Friday at 2:30 p.m. Central – Commitments of Traders
• Monday at 3:00 p.m. Central – Crop Progress Report
• Thursday at 7:30 a.m. Central – Export Sales Report
• Thursday at 2:30 p.m. Central – Cotton On-Call Report