Index fund rolling of longs from December contributed to increased spread trading. Mostly favorable harvest weather expected remainder of the week.
Cotton futures settled on slight losses Tuesday, with December trading on both sides of unchanged and completing an inside-range day.
December closed down 26 points at 68.38 cents, around the lower third of its 80-point range from up 27 points at 68.91 to down 53 points at 68.11 cents. It ended within seven ticks of last month’s close, down 0.1%.
March dipped 24 points to close at 68.79 cents, trading within a tight 72-point range from 68.79 to 68.07 cents. The other contract months closed down 17 to 23 points.
Volume rose to an estimated 30,719 lots from 27,920 lots the prior session when spreads accounted for 15,243 lots or 55%, EFS 513 lots and EFP 80 lots. Options volume slowed to 3,610 lots (1,122 calls and 2,488 puts) from 4,438 lots (2,369 calls and 2,069 puts).
The onset of scheduled index fund rolling of longs from December, selling the front month and buying March, contributed to Monday’s proportionately heavier spread trading.
Rolling by specs and other funds already had appeared taking place, with the inverted December-March spread having narrowed to just above even money from a 67-point December premium at the end of September.
The process frequently is expected to exert price pressure and increase volatility, but some analysts say small stocks in deliverable position may help to support December as rolling continues.
Index funds reduced their net longs 1,258 lots to 68,859 in cotton futures-options combined during the week ended last Tuesday, according to the latest traders-commitments data reported by the Commodity Futures Trading Commission.
Managed money traders sold a net 1,621 lots that reporting week, liquidating 1,928 longs and covering 307 shorts to shave their net longs to 47,061 lots.
On the U.S. crop scene, favorable harvesting and ginning weather is expected across most of the Cotton Belt this week following a killing freeze in much of the Texas High and Rolling Plains over the weekend.
A few light showers dotted the Plains Tuesday, but sunny, warm conditions then are forecast into early next week. However, gusty, warm winds are expected to elevate fire dangers Wednesday and Thursday afternoons. Sustained westerly winds also may exceed 30 mph Wednesday.
Classing quickened at the two USDA facilities on the High Plains to one-day averages last week of 46,370 running bales at Lubbock and 12,935 RB at Lamesa. Those two offices had graded 116,564 RB for the season and the Abilene facility had classed 13,785 RB from the Rolling Plains.
U.S. classing of 939,188 RB of upland for the week included 234,714 RB from the Southeast, 429,365 from the Mid-South, 247,640 from the Southwest and 27,649 from the West. The Texas Plains usually is the final area to complete the harvest.
South Delta producers reported yields of around 1,100 pounds per acre, somewhat less than expected.
Futures open interest grew 1,056 lots Monday to 232,412, with December’s down 2,440 lots to 107,439 and March’s up 3,115 lots to 83,031. Certified stocks were unchanged at 2,031 bales.