The overnight open interest in cotton has been increased to 245,742 – a new record high. The unbalanced prices between cotton and grains might have attracted funds to speculate in the cotton market. Wednesday session was called to open a little lower due from outside market pressure.
Overnight wheat was down 16 points, but traded limit down during the day session. This in combination with the weaker stock market triggered cotton to trade even lower to touch the session low. December contract was pushed below 64 cents, and trade scale down buying came in around this level. Session traded in the lower range until close with settlement losing ground in all cover months.
December contract was down 141 points to settle at 63.85. The early freeze in west Texas turned out to be a light one, and it might have just helped farmers to save a lot of money. The freeze is going to help dry out the cotton bolls and speed up the defoliation process.
Chemicals would have been sprayed throughout the crop without the freeze, which could be a big cost to most of the farmers. There's also report that this year's South Plains cotton crop is expected to be the second or third largest crop ever.
A big drawback on the technical chart today as December contract lost almost all the ground gained since last Thursday. The RSI is well balanced at 50%, but the settlement price is below the 9 day average now.
It might indicate that the cotton price is goingtowards the right direction since all fundamentals are bearish. As the outside markets such as grains and stock market are looking weak today, it seems that the cotton market is just following the lead.
Harvest is coming along the way, while no big demand is seen anywhere. There's no expectation of a big sales report tomorrow and the pressure might drive the price even further lower.
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