On Wednesday, the December'06 contract expired at 49.00 cents, making it the 10th consecutive futures contract that left the board between 47.50 and 53.79 cents.
No wonder volatility got crushed over the last couple of years and is currently at just about 18 percent in March.
The December notice period turned out to be rather uneventful, despite the record amount of certificated cotton on hand.
Most of the 740'599 bales will stay with their original owners, as there have been just 2'053 notices (205'300 bales) issued so far and the remaining open interest is down to a miniscule 559 contracts (55'900 bales) as of this morning.
This is due to the fact that the certificated stock was the cheapest available recap in the US market when December entered the notice period.
At that point it didn't really matter whether the spread to March was wide enough or not, since most of that old crop certificated stock will probably get shipped.
Whether it will ultimately be replaced with new crop cotton depends on what the AWP/March futures spread offers over the next couple of months.
Last week that spread widened briefly to over 1100 points, which opened the door to loan cotton wide enough to free up an additional 1.4 mio bales.
This brings total loan redemptions for current crop to 2.2 mio bales. This week the AWP measured 43.09 cents and the high in March futures reached 54.10 cents, which theoretically put the spread right at 1100 points, although not much volume was exchanged at that level and for most of the week any potential hedgers were looking at a maximum of 1060 points.
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