The standoff continues between the historically long specs and the significantly short trade. With mills having some 11.5 million bales of cotton yet to fix, they seem willing to wait on prices retreating as witnessed by their roll to May and July.

In turn, the specs are long at levels not seen since 2010/2011. The lack of additional spec money to buy the market has limited any price rallies, while with the mills there to price on any break creates a firm floor.

Thus the December contract has traded between 73 and 75 cents for over a month now. ItΆs our belief this trading range will hold firm, at least in the short term, until the crop gets in the ground. ThatΆs not to say there wonΆt be volatility, such as yesterdayΆs (3/2) old crop selloff of over 200 points in just 10 minutes, only to find it bouncing back to almost unchanged before the close.

With time on the side of the specs, this standoff will most likely be settled with the mills forced to price as May and July contracts near expiration, a move likely to bolster prices.

The biggest positive of late has been an increase in demand for U.S. cotton. An attractive basis has made high quality U.S. cotton a bargain for foreign mills. Just last week U.S. export sales topped half a million bales, the highest level in two years while shipments have exceeded 300,000 bales for the past two weeks.

This puts us well ahead of the pace necessary to meet the USDA export estimate. ItΆs very possible we will see them raise this number in next weekΆs Supply/Demand report. In any event, this strong demand will certainly be favorable to the U.S. cotton balance sheet.

Also, it is largely responsible for new crop prices latest run to 75 cents. Last week when the USDA raised intended planted acres by 500,000 to 11.5 million the market didnΆt bat an eye and actually traded higher. Normally, you would have seen a triple digit selloff, if not for the fact the market has taken into account this renewed demand.