For the week ending Friday, October 20, the ICE Dec’23 futures contract slid to the lower end of the most recent three month trading range (see chart above courtesy of Barchart.com).  The apparent fuel of long liquidation and outright shorting had the additional catalyst of major technical sell triggers. The Dec’23 contract settled Friday down 187 points at 82.40 cents per pound.  Chinese cotton prices and the the A-Index of world cotton prices both declined across the week.

In other ag futures markets, CBOT corn and KC wheat futures both traded flat before taking a big stair-step higher toward week’s end.  CBOT soybeans followed more of an uptrend across the week.  The U.S. dollar index trended lower early in the week and then followed a sideways gyration. Other macro influences (i.e., GDP, inflation, and interest rate policy) remain a potential headwind to longer term cotton demand.  One example of that this week were risk on/off reactions in apparent response to the ongoing Arab-Israeli conflict.

Cotton-specific influences included clear, open harvest weather over Texas, but with continued scattered showers along the Upper Atlantic seaboard.  Recent rains represent a negative influence on the 2023 crop (i.e., delaying harvest and bad for color grades).  The latest Texas regional summaries highlight mostly dry conditions  (click here and scroll past the feature article).

U.S. export sales through October 12 were improved week over week, but generally continue to reflect tepid demand for U.S. cotton exports. Actual export shipments were below the needed weekly average pace, but this is seasonally normal.  USDA’s weekly summary of the U.S. regional markets continued to reflect mixed spot physical trading activity and very light to moderate demand, across the U.S. regions.  Several other standard predictors of U.S. cotton demand are not encouraging, e.g., rising certified stocks and historically low levels of on-call sales.

ICE cotton futures open interest eroded this week.  In combination with the lower price settlements, this pattern gave the appearance of long liquidation.  Indeed, through Tuesday, October 17, the regular snapshot of speculative positioning showed long liquidation with a substantial 11,882 fewer hedge fund longs and  2,892 fewer net index fund longs, week over week.  This was reinforced by 2,836 more outright hedge fund shorts compared to the previous Tuesday.

For more details and data on Old Crop and New Crop fundamentals, plus other near term influences, follow these links (or the drop-down menus above) to those sub-pages.