Cotton Futures began the day being well offered, with one fund in particular offering 500 Dec on the open. A 40 lower opening ensued, however this did find some semblance of trade support near the 49.00 cent level come the re-opening.
The market nearly immediately reverted into a spread trading market, with the Dec / March again moving considerable wider as heavy fund bear spreading continues to weigh on the December.
With the GSCI roll beginning next Tuesday, many of the replication and tracker funds are already rolling long Decembers into March.
This switch widened beyond 400 today for the first time. Prices improved off some first hour lows some 63 lower in Dec, near to the point of being unchanged, however the pressure on the Dec / March switch told all day and Dec did never have the ability to rally above unchanged.
Some fund buying in the December 07 saw this difference push out as wide as 925, and this was also helped by a fund buying in excess of 1000 of the Dec 07 7000 calls for 100-108.
There was a scattering of Dec selling on the close to keep values pressed into the close, with estimated volume coming in around 26,000 lots.
Tomorrow's US export sales and shipments are not expected to be too impressive, with estimates for sales around 100,000 bales and shipments around 125,000.
Recent export business has certainly been disappointing out of the US, but export basis is very uncompetitive right now, especially when faced with the fact that no cotton can be redeemed out of the loan at current levels.
marketing@alchempro.com
