The bulls were the winners this week with the Dec contract gaining 175 points Vs last Friday, settling at 70.82. The nearby spread, which remains at far less than full carry, was essentially unchanged on the week.
Internationally, we continue to hear that IndiaΆs crop is likely larger than the USDA currently has it pegged while the crop in China may be a bit smaller. We also learned that spinners in Brazil have petitioned their government for an import tax emption for raw cotton due to the relatively poor quality (or lack of high quality, at least) of this seasonΆs drought-stressed crop.
US export sales were off more than 200K running bales from the week ending Oct 13, but were just enough to meet the weekly pace required to match the USDAΆs latest export target. Shipments, however, remain weak, but this situation should correct itself in due time. The US is now in excess of 53% committed against the USDAΆs 12M bale export prognostication.
The index funds have begun to roll their longs forward, and this is normally a source of selling pressure at this point of the season that tends to dampen rallies. However, the trade has held a massive net short futures position (most of it against the Dec 16 contract) and it certainly looked today as if they were either fixing on-call purchases or rolling hedges forward – probably both.
Producers continue to see strong basis, suggesting that despite a rapidly progressing harvest, the pipeline remains less than full. Of course, weΆve seen a historically strong basis well into February the past two seasons, so perhaps this is the “new normal.” Despite that possibility, a few decades of seeing the basis widen in the winter leads us to think a strong basis and a rally over 70 cents is a good time for growers to sell classed cotton.
It is hard to find many market gurus who see a short/medium term high of much more than a couple of cents above FridayΆs close, so the upside risk of sales at this level seem minimal. By a similar token, of course, weΆve been trading a pretty well defined channel for at least the past month, so the short-term downside may be limited as well. That said, March or May puts against unclassed cotton wouldnΆt be a bad insurance policy.
For next week, the standard weekly technical analysis for and money flow into the Dec contract are supportive to bullish. US net export sales for the week ending Nov 3 do not seem likely to show a great deal of improvement Vs the figures put forth this week. And, funds will continue to roll longs forward, at differing levels, over the coming days.
If you had asked me at this time last week what I would be doing this weekend I would likely have answered “work”. But this yearΆs World Series matchup of the Chicago Cubs and the Cleveland Indians (two of the big leagueΆs perennial underachievers) are tied 1 – 1 in the best of 7 series. And this has prompted me to consider attending to doomsday preparations. Surely this is sign of the end times.
Now, I lived in Chicago for 5 years, and I loved taking the train, or a taxi, north from downtown to watch the Cubbies (and I hope they win), but, not being a native of the city, I felt no compulsion to subject myself to the agony of their fan base.
And, if the Cubs manage to snap their current 108 year streak sans a championship (the Indians have not won since 1948) can it truly be said that the “curse of the billy goat” has truly been broken with a victory over Cleveland?
