ICE cotton futures continued in volatile fashion for the week ending March 8, with multiple limit moves and one cent moves (see chart above courtesy of Barchart.com). Chinese cotton prices were mostly flat across the week, as was the A-Index of world prices.
In other ag futures markets, old crop CBOT corn, CBOT soybeans, and KC wheat all followed their own gyrating paths towards somewhat higher prices this week. The U.S. dollar index trended lower across the week, with latter weakness apparently associated with increasing expectations of lower interest rates. Other macro influences (i.e., GDP, inflation, and interest rate policy) have shown mixed signs.
Cotton-specific influences included bullish but not surprising supply and demand revisions in USDA’s March WASDE report. This week saw weak U.S. export sales (as of February 29) in keeping with the expected demand response to recently rising prices. Actual export shipments were above the level needed weekly average pace. USDA’s weekly summary of the U.S. regional markets reflected inactive/slow trading of physical cotton trading activity and light to moderate demand, across the U.S. regions. Several other standard predictors of U.S. cotton demand are bearish looking, e.g., sharply rising certified stocks as an alternative to mill apathy in the wake of the large old/new crop inversion, as well as historically low levels of on-call sales.
ICE cotton futures open interest gradually rose across the week. Coupled with this week’s mixed pattern of price settlements, there wasn’t a clear/strong implication for speculative positioning. The regular Tuesday (March 5) snapshot of weekly speculative positioning showed a mixed situation with 1,255 fewer (liquidated) hedge fund longs, reinforced by 985 more (outright) hedge fund shorts, week over week. However, over the same period the index fund net long position increased by 1,765 contracts, so the market effect may be a wash.
For more details and data on Old Crop and New Crop fundamentals, plus other near term influences, follow these links (or the drop-down menus above) to those sub-pages.
Source: TAMU