Investors complaining about the lack of volatility in financial markets overlooked cotton.

While the Vix index of expected US equity turbulence — often termed the "fear index" — this week closed at a 23-year low, cottonfutures,  having in the last session notched up their biggest daily gain in 10 months, went even further on Friday.

The July cotton contract closed up the exchange maximum of 3.00 cents (3.8%) at 82.18 cents a pound, the highest level in nearly three years for a spot contact.

'Anything but encouraging'

The gain, which took to 7.4% the contract's gain in two session, puzzled many observers, including Commerzbank, which said that "there is no fundamental explanation for the price surge".

"The latest estimates [for the global cotton balance sheet in 2017-18] published by the US Department of Agriculture the day before were anything but encouraging" for bulls, the bank said.

"The USDA envisages global cotton production of 113.2m bales in 2017-18. The USDA was still predicting a figure of 108m bales back in February."

'Surprisingly positive'

However, one factor noted as spurring the price gains was US export data on Thursday, which showed "seasonally strong" export sales of cotton last week, according to Louis Rose at Rose Commodity Group.

"The US export data were surprisingly positive," Commerzbank acknowledged.

Actual exports, at 430,000 running bales, were even more promising, in terms of indicating some tightness in the world market, and backing expectations that the USDA will again be forced to revise up its forecast for domestic shipments in 2017-18.

Cotton vs polyester

Still, whether the rally is sowing the seeds of its own demise…

Mr Rose also noted the threat of cotton's price surge losing it demand to rival fibres, besides an apparent disconnect between US and world cotton values.

"Internationally, we continue to be concerned about the weakening of both cotton yarn and polyester quotes across many cotton spinning geographies," he said.

"A month or so back we heard from one source within the trade that if ICE July futures moved to challenge the 81.00–82.00 cents a pound level, that significant cancelling of on-call commitments could be expected.

"We have breached this benchmark this evening."

Cocoa bubbles

Among other ag markets, cocoa posted decent gains, settling up 3.2% at $2,015 a tonne in New York for July delivery – taking gains for the week to 8%, the best weekly performance since August 2012.

That will be sweet for the investors which have hiked their long exposure in cocoa exchange traded products to well above those in, say, corn, as Agrimoney.com reported.

And the rally came amid unrest among the military in Ivory Coast, the top cocoa producing country, over a pay dispute.

There is also some concern over West African weather too, with Jack Scoville at Price Futures sayong that "more rain is needed to help maintain crop condition as temperatures have been warm to hot".

Wheat's Lazarus act

But grains failed to move too far, according with the broader financial markets theme,

"It rally could not be much quieter," said Darrell Holaday at Country Futures, saying futures were in a "generally very narrow trading range and volume is generally light".

Chicago wheat futures for July, for instance, managing a 0.1% move, downward, to $4.52 ¾ a bushel.

The decline came amid waning weather fears, on two counts.

The first was a reminder that late April cold and snows do not appear to have caused nearly as much damage as originally feared.

"Most of the wheat that was affected by the snow storm in the western portion of the hard red winter wheat belt is back to standing after being laid down from the wind and weight of the heavy wet snow," said CHS Hedging.

'Great progress'

The second weather factor was improved sowing conditions for the northern US Plans into Canada, spring wheat country.

"Spring wheat acres are flying into the ground," said Minnesota-based CHS Hedging.

"Minnesota should be close to wrapping up wheat planting.

"North Dakota is making great progress too, but some areas are still wet after ample snowfall this winter and a wet spring."

Spring wheat futures themselves dropped 0.3% to $5.46 ¾ a bushel in Minneapolis, for July delivery.,

'Another wet period'

However, futures in rival grain corn added 0.5% to $3.71 a bushel, closing back above their 50-day moving average, amid fresh uncertainty over planting weather further south, in the eastern Corn Belt.

"Weather models still pointing to a window of dryness through mid-week next week, but also indicate another wet period beginning at that time," Mr Holaday said.

"The two week forecast is turning wetter," said Bewnson Quinn Commodities, adding that "the rains will be welcome in the north.

"But in the eastern half of the Corn Belt, the trade is speculating on prevent plant acres and what the excessive moisture will do to corn and soybean yield potential.

"Many 'what-if' balance sheet scenarios are floating around that could have the US corn and bean balance sheets tightening slightly year-on-year is top end of production has been taken off the crops."

'Poor exports sales'

Informa waded into the balance sheet tweaks by lowering it own forecast for US corn plantings by 1.1m acres to 89.72m acres, a touch below the official USDA figure of 90.0m acres.

But the soybean sowings estimate was less supportive for prices, being raised by nearly 1m acres to 89.662m acres.

Furthermore, "poor exports sales, bigger South American crops continue to weigh on the soybean market," CHS Hedging said.

And weather delays to corn sowings could be perceived as bearish for soybeans too, in raising the chances indeed of higher soybean seedings, as farmers switch to a crop which can be slightly later planted.