By Keith Brown DTN Cotton Contributing Analyst
The market was crushed Wednesday as dejected speculators abandoned their bullish “storm positions” with impunity. That is, a ton of traders bought the market in advance of Hurricane Michael’s approach to the Gulf Coast, anticipating a sharp price spike. However, poor demand numbers and bearish Chinese trade rhetoric undermined any hopes for a significant supply rally off of the storm. Hence, traders fled their positions, taking prices down over 200 points.
Estimated volume was heavy at 40,500 contracts traded. Interestingly volume has been running high this week, with Monday at 40,500 contracts, Tuesday at 37,500 contracts, and then Wednesday’s aforementioned 40,300 contracts. Those volume numbers suggests a ton of bullish energy was expended at the high end of the market with no breakout results.
Thursday, USDA will publish it weekly sales and exports and prospect for big numbers are low. China, of course, has flash cancellations the last three consecutive weeks, so expectations are low. Remember the immediate driver for this market is lack of demand, not lack of supply. Later in the season that lack of supply will help rally prices, but the market must first see evidence that demand is gaining muscle.
December cotton settled Wednesday 77.07 cents down 192 points, March was 78.87 cents, down 183 points, and Red December finished 77.00 cents, down 51 points.