Cotton futures started out being called around 20 higher as some higher than unchanged bids out of spec funds immediately set the tone for the day. March opened around 10-20 higher, setting the low mark for the day.
Similar to Friday, there was a large amount of fund buying today, as recently established shorts begin to seriously question their position in the market, especially after the recent technical consolidation and strength off contract lows. What is also noticeable is that commercial hedge pressure is nowhere to be found until at the very least an 11c spread from the AWP (currently 42.11) and March futures.
When considering that this is bare minimum and most equities will take something closer to 12c ++, we can see March not being under any serious commercial pressure until 54 cents.
Prices continued firm throughout the session, also buoyed by the fact that most holders of the 730,000+ cert stock position will not be handing ownership over at the current levels, most certainly due to the trades inability to get their hands on new crop cotton.
Open interest in December is down to 1,809 lots having already had 1,062 lots issued. This spec buying continued into the close where most contracts closed at not only daily, but higher highs than the previous two weeks. Estimated volume today was back to more rational levels after the roll happy last two weeks, today just 13,400 lots.
The US crop is now officially 83 percent harvested according to today's USDA update, comparing to the 5 year average of 81 percent March seems to have put in something of a low last week, bouncing nicely off the 50.80 area whilst also managing to break atop the short term trend channel created from the start of the month.
marketing@alchempro.com
