NY cotton futures ends volatile week slightly lower

01 Feb '14

5 min read

Shorts may stall for time by rolling their positions from March to May and then again from May to July, but there will be a day of reckoning unless a deteriorating macro picture flushes the specs out first. Merchants have been increasing the certified stock to around 150’000 bales this week and will probably add some more in an effort to stem the advance, but this may simply be good enough to force some carry in the market.

While trade shorts have no other choice but to buy back their contacts between now and June, spec longs have the option to roll their longs into new crop and pick up huge roll gains in the process. In other words, the shorts have to get out, while the longs don’t, and that in a nutshell is the story that drives current crop prices higher.

New crop is still an entirely different story, as plenty of growers are waiting for an opportunity to put on some hedges against next season’s crop. December ran into heavy resistance at the psychologically important 80 cents level last week and has since dropped back below 77 cents, but we would not sell it here and instead wait for another opportunity.

Plexus Cotton Limited

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