The July ICE cotton contract barely traded Thursday as it approaches its July 9 expiration. Of course, delivery issues are affecting it at this point. That probably will not change before it goes off the board. Thus, activity in the October contract has accelerated dramatically from the laggardly pace seen a few weeks ago.

The fall contract actually rose substantially (0.84 cents to 86.13 cents/pound). I suspect there was an old-crop flavor to the rise, since it will be rather difficult for the cotton industry to harvest, process and ready for delivery cotton grown this year by early-to-mid-October. Still, wire service reports suggested that concerns about a large heat wave across the Western U.S. and its potential impact upon cotton grown in the Southwest (particularly in Texas).

Bulls also had to be encouraged by the third consecutive gain posted by equity indexes, since demand for apparel and that for cotton is linked rather closely to economic growth. Thus, the stock rebound from last week, and in particular the change in market dialog since that time, is almost surely spurring increased optimism about the cotton outlook. Of course, major questions about 2013/14 prospects remains, especially concerning Chinese willingness to continue supporting the global market through its massive cotton stockpiling program.

As pointed out previously, they may be in the process of shifting to a program comparable to the deficiency payment system used in the U.S., but it is much too early to make any definitive statements on that score. Indeed, all longer-term considerations will almost surely get cast to the wayside tomorrow, when the USDA releases its Acreage report. Unfortunately, we have seen nothing regarding industry expectations for forthcoming estimate of U.S. cotton plantings. We will do our best to disseminate them if/when we see them.