Cotton bulls closed out 2017 with 10 consecutive weekly wins, the most recent a 76 point gain. ICE Mar futures gained 582 points in Dec and, on a rolling front month basis, ICE cotton gained 685 points for 2017. Not bad.
The Mar – May spread managed to invert briefly this week but closed the week out at (33).
As expected, total net export sales for the week ending Dec 21 were noticeably lower Vs the previous sales period at around 177K running bales. Shipments were a MY high at nearly 297K running bales, but have yet to exceed the weekly pace required to meet the USDA’s export projection(s). The US will need to ship an average of more than 350K running bales per week in order for the USDA’s 14.8MK bale (480lbs) export target to be realized.
With respect to the US crop, some harvesting remains to be accomplished, but not much. The pace of classing slowed for the week ending Dec 28 Vs the previous assay period, but the most recent period did include the Christmas holiday and the period ending Jan 4 will encompass the New Year’s holiday.
Our pace of classing model suggests that total US production in 2017 will likely be a bit greater than the USDA’s most recent estimate of 21.44M bales.
For next week, the standard weekly technical analysis for and money flow into the Mar contract remain bullish; but the market also remains in a technically overbought condition on a both a daily and weekly basis. Next week will be another abbreviated trading week with the USDA’s weekly reports again to be delayed one day Vs their regularly scheduled release times.
A final note – index funds (they hold the majority of the non-commercial aggregate long position in cotton) will rebalance their portfolios in early to mid-Jan. In general, these funds tend to buy annual “losers” and sell annual “winners”, which is less than friendly for ICE cotton futures.
Have a happy, prosperous and safe New Year!
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