Keith Brown DTN Contributing Cotton Analyst
The cotton market closed sharply lower Thursday after posting even higher highs in its bullish run. In fact, July cotton hovered at limit down for most of the session. One outside force that may have caused the decline was the recovery of the U.S. dollar. The greenback made a new 10-year high today by one tiny tick. That in turn soured the Dow, which promptly gave back all of its 900-plus point gain from Wednesday's rally.
Thursday's weekly export sales were very positive, but the cotton market was in a risk-off mood. In some industry circles there are continuing worries about foreign demand, given China's lockdowns. However, these concerns are also spreading to the domestic market as well as inflation may result in U.S. consumers reducing their apparel buying.
Recently, India said it would allow duty-free imports of cotton due to its failing crop. That move somewhat implied that it would halt exports of cotton. To date, that hasn't happened. However, this week India said that it will halt exports of wheat. One wonders if cotton exports can be that far behind.
Friday, spot May cotton will expire on the close. We think we understand that its open interest stands at zero, meaning some sort of nominal (computer-generated) settlement will be concocted on Friday.
Also Friday the CFTC will issue its weekly commitments of traders report. The data will update the major trading categories. Last week, the managed-money funds had slipped to 69,273 contracts long, from its previous 73,512 net long contracts.
For Thursday, May cotton settled at 152.02 cents, down 6.00 cents, July closed at 148.76 cents, down 6.00 cents and December finished at 126.44 cents, 3.34 cents lower; estimated volume was 31,501 contracts.
Keith Brown can be reached at email@example.com
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