Certified Stocks

Discussion
The current allocation of certified stocks, and a lot more cotton futures information, can be found on the ICE futures website under “Featured Reports”.  Certified stocks represent mostly merchant inventory that is in position to be delivered against short futures contract positions. The level of certificated stocks in delivery point warehouses is reported daily by the ICE. A high level of certificated stocks (e.g., over several hundred thousand bales) represents a greater credible threat of physical delivery of cotton against long futures positions held past first notice day.  As the chart above shows, certificated stocks plummeted this summer from 600,000 bales to almost zero during the summer.  Had it stayed there, it might have encourage speculative funds to take larger long positions with less of a getting caught in a short squeeze. That is, the fund sector may feel like it has more room to push the futures market higher (and further from the cash market).  Since the fall of 2016 the certificated stock has been rising. For the week ending June 22, the certified stock climbed to over 490,000 contracts in a continuing upward trend.  As such, certified stocks have reasserted a bearish implication for futures prices by potentially scaring away excess speculative buying.

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