For the week ending Friday, November 10, Dec’23 cotton futures continued their 9-day slide, bottoming Wednesday below 75 cents per pound before partially recovering (see chart above courtesy of Barchart.com). Dec’23 ICE cotton futures settled the week up 80 points at 77.32 cents per pound. Chinese cotton prices had an up-and-down pattern this week while the A-Index of world cotton prices trended lower.
In other ag futures markets, CBOT corn trended lower this week, while CBOT soybeans and KC wheat futures both saw more of a sideways gyration. The U.S. dollar index rose steadily across the week. Other macro influences (i.e., GDP, inflation, and interest rate policy) remain a potential headwind to longer term cotton demand.
Cotton-specific influences included moderately bearish supply/demand numbers from USDA. Drier weather over the Cotton Belt should probably facilitate harvest operations. The Texas regional summaries (as of November 8) highlighted some of the benefits of the recent rainfall — but mainly to range, wheat, and next year’s spring crops (click here and scroll past the feature article).
U.S. export sales through November 9 remained decent following the very strong levels of the previous several weeks, as well as the pattern of China-dominant buying. The recent boom reflects the expected response of more U.S. cotton export sales from the recently lower prices. Actual export shipments remain below the needed weekly average pace, but this is seasonally normal. USDA’s weekly summary of the U.S. regional markets continued to reflect mixed spot physical trading activity and very light to moderate demand, across the U.S. regions. Several other standard predictors of U.S. cotton demand are not encouraging, e.g., rising certified stocks and historically low levels of on-call sales.
ICE cotton futures open interest declined across the week. The coincidence of lower price settlements gave the appearance of long liquidation, although this may be complicated by the context of massive fund rolling (hence the historically high volumes). The regular Tuesday (November 7) snapshot of speculative positioning showed long liquidation with 721 fewer hedge fund longs and 82 fewer net index fund longs, week over week. This was reinforced by 431 more outright hedge fund shorts compared to the previous Tuesday.