Issues surrounding the impending expiration of the July cotton contract apparently affected the ICE market again Wednesday. Indeed, wire service reports suggested that 400,000 bales could be delivered against it as it goes through the expiration process. For example, the exchange reported that notices for delivery of 1,030 contracts had been posted Tuesday, with one source mentioning the 400,000 bale figure. On the other hand, bulls argued that a large long position holder, possibly a merchant, probably needed the cotton, which in turn would tend to negate the bearish implications of large deliveries.
The broader markets seemed to have mixed implications for while fiber values. That is, equity index futures proved quite strong for a second straight session, with the DJIA jumping about 150 points to 14,910. That seemingly implies persistent economic strength later this year, which in turn holds supportive indications for future apparel and cotton demand. On the other hand, the U.S. dollar also prove quite strong Wednesday, thereby suggesting international demand for dollar-denominated U.S. cotton could suffer. The fact that the stock indices now face major technical resistance at moderately higher levels, whereas the greenback topped its 40 and 50-day moving averages today, suggests continued financial market pressure upon the commodity markets.
In fact, the 2013 cotton contracts failed at or just below chart resistance associated with their respective 40-day moving averages today. That seemingly bodes ill for the short-term price outlook. Of course, the situation could change dramatically when the USDA Acreage report is released Friday morning.