ICE Mar futures finished the holiday-shortened week near unchanged, giving up 3 point, settling at 63.66 on light volume. Specs liquidated long positions this week, but the week capped with an 89 point daily gain. Dec gave back 11 points on the week, settling at 64.85.
US export sales for the week ending Dec 17 were nothing to get excited about at 130K running bales, but they were also not bad for the holiday season. And, both sales and shipments posted week over week improvements. The story will really unfold post the beginning of the New Year.
According to many analysts and associated organizations, both this yearΆs domestic and world aggregate crops continue to get smaller. A US crop of 12.85M bales is becoming increasingly accepted within the industry and among other traders, as well. These estimates and projections are very much in line with our own, as we have stated within this space for quite some time. One should rarely bet long on production for a late-sown crop – especially in a year when El Nino is present.
At the world aggregate level, Cotton Outlook has revised its 2015/16 production estimate to just above 100M bales while also giving a slight boost to its world consumption figure vs its Nov estimate. The sentiment seems to be that world supply is shrinking. And, while it is far too early to term the world balance sheets as bullish, things seem to be moving in the right direction, for producers, at least.
Spot basis remain strong in the country, and higher quality recaps continue to bring bids of 300-500 over March, or corresponding equity prices. Combined with the recent approval and rebirth of certificate redemption, producer still holding cotton have reason to breath a slight sigh of relief.
That said, March has traded a narrow channel for most of its life, and we believe it makes sense to sell recaps on any move much over 65 cents. This is unlikely to happen on a short holiday week, but surprises do occur, and a holiday call to your local buyer or broker might be in order.
For next week the standard weekly technical analysis for the Mar contract is bullish, improved from last weekΆs neutral reading, while weekly money flow into the Mar contract is less than supportive. Export sales for the week ending Dec 24 are likely to resemble those disseminated today.
Merry Christmas!
Louis W Rose IV, PhD has worked with cotton as a producer, consultant, analyst and trader. Rose holds degrees in Education, Agriculture, Plant Science and Business (MBA) from AR St Univ, OK St Univ and the Univ of Memphis, respectively. He has held positions with Aon Reinsurance and Cargill Cotton. Rose currently provides analytic services for various clients and media outlets and is the co-founder of Risk Analytics, LLC, producers of The Rose Report, which he authors. For more info on The Rose Report or analytic services, please visit: www.rosecottonreport.com
