Cotton bulls were once again small winners on the week as demand became the market’s focal point, with the Mar contract picking up 21 points.  The Dec – Mar switch is once again significantly inverted at 43.

This week was seemingly all about demand.  The prospect of US production above 21M bales looks to have been largely priced into the current market.  Even some West Texas micronaire issues and a higher than normal occurrence of 4-leaf Mid-southern cotton do not seem to have caused the current market to blink.  Demand, however, continues to surge.

US export sales for the week ending Nov 9 of nearly 525K running bales were not merely marketing year high but were also the largest figure put forth in nearly three years.  However, the market did not react as one might have expected.

It is true that shipments were weak at around 100K running bales, but the fact that nearly 60% of upland sales were attributable to Pakistan likely caused concerns as well.  The huge sales to Pakistan were a combination of concerns by Pakistani spinners regarding possible future import restrictions in a year with significant quality concerns with its domestic crop and the ongoing discord with its cotton-exporting neighbor, India.  And, one (or both) of these issues could be rectified before the US delivers on its recent commitments.

Similar sales numbers associated with China might have prompted the market to touch limit-up.

Still, a win is a win, as they say, and we’ll take it.  Regardless of the root nature of the large sales to Pakistan, one can hardly term them bearish and the market did, at least in part, react accordingly.

Internationally, China is making a push toward mechanized harvesting of its crop.  Pictures emerged on the internet this week of baler pickers as they moved across fields in southern Xinjiang this year, and some producing regions in the nation’s eastern sector are developing plans for the cooperative mechanized sowing and harvesting of cotton from this year forward.  Worth noting is that uniform, machine-harvested cotton within China could ultimately lead to less demand for high-quality US cotton for the Chinese spinning industry.

Producers with on call contracts likely received calls from their buyers this past week, encouraging them to roll or fix ahead of the upcoming first notice day.  Given a market hovering just below many producers’ target prices, many producers opted to roll to Mar, May, or Jul, and this could account for some of the volume this past week.

Holiday weeks have traditionally been slow times in the spot market.  Many trading offices are staffed by skeleton crews, and those traders who are in the office are frequently distracted by the excitement or stress of an impending Thanksgiving with the family and in-laws.  This can also open opportunities for traders eager to make a move without the entire industry foiling their plans.  Producers should be sure they have standing orders with their buyers to take advantage of unexpected market moves, particularly on Friday.

For next week, the standard weekly technical analysis for the Mar contract remains less than supportive while money flow now favors upward price movement.  Although the holidays are often slow for spot brokers, futures markets are no stranger to volatile trading action on relatively light volume.  The first notice day for Dec is Friday, Nov 24 – an abbreviated trading day – and final evening of Dec positions could drive some market volatility to close out the week.

Have a great weekend!