Market remained in a consolidation pattern. Rapid buildup of stocks in deliverable position may have stemmed at least partly from some export sales cancellations.
Cotton futures remained in a consolidation pattern Tuesday, finishing narrowly ahead on continued light dealings and tight trading ranges.
Spot December edged up 10 points to close at 83.71 cents, near the middle of its 66-point range from up 47 points to 84.08 cents to down 19 points at 83.42 cents and its highest finish since Oct. 5.
December has closed slightly higher three sessions in a row but its high-low settlements since a week ago Monday have spanned only 85 points, from 84.02 to 83.17 cents.
Traders continued to monitor talks in Washington where wrangling persisted on a deal to avoid a U.S. debt default and reopen the government. Mixed signals on the stalemate have confused markets.
The United States is scheduled to reach its borrowing limit on Thursday, jeopardizing its ability to pay its bills, while the partial government shutdown is in its 15th day.
Volume edged up to an estimated 12,200 lots from 9,345 lots the prior session when spreads accounted for 3,013 lots or 32% and EFP for 26 lots. Options volume slowed to 3,550 lots — 1,339 calls and 2,211 puts.
March settled up 13 points to 84.69 cents, nudging its settlement premium over December out to 98 points. December had closed at a 21-point premium on Oct. 1. A rapid buildup of certificated stocks has contributed to DecemberΆs widened discount.
The exchange stocks are thought to have been swelled by recertification of some cotton taken on the July contract and are expected to continue to grow, possibly reaching up to 150,000 bales or more. But some analysts also say the fate of the December-March spread may hinge on weather and harvest conditions in coming weeks.
Talk has circulated that the rapid buildup of the stocks in deliverable position may have stemmed at least partly from some cancellations of export sales after the recent price retreat.
Certificated stocks expanded 10,989 bales Tuesday to 35,292, up from 11,909 bales just 11 days ago and 7,639 bales a year ago.
An additional 34,788 bales awaited review — 4,960 bales at Galveston, 10,328 at Greenville and 19,500 at Memphis — for a possible total of 70,080 bales.
Exchange stocks often increase after about mid-October, but the U.S. harvest has lagged well behind normal. The last USDA progress report issued before the government shutdown showed only 7% off the stalk as of Sept. 29, compared with 13% a year ago and 14% for the five-year average.
Futures open interest dipped 995 lots Monday to 204,081, with DecemberΆs down 1,381 lots to 122,694 and MarchΆs up 265 lots to 62,136.
World values as measured by the Cotlook A Index gained 25 points Tuesday morning to 89.70 cents. The premium to MondayΆs December futures settlement widened a point to 6.09 cents.
