The federal Commodity Futures Trading Commission (CFTC) publishes a report showing the quantity of cotton that has been bought or sold where the sales price has not yet been fixed.  This type of contracting is normally for basis contracts, which are also referred to as “on call” contracts. Textile mills routinely buy cotton from merchants using “on call” contracts. When these parties enter in to the “on call” contract, a futures contract would normally be sold to hedge the transaction. Later, when the mill actually fixes the price, that short futures position would be bought back. This could be done with options or futures. To the extent that mills don’t independently cover their options positions, their un-priced “on call” contracts are reflected in the current “on call” sales report, under “Unfixed Call Sales”, which is reported by individual futures contract.

Also, when the unfixed call sales outweighs the unfixed call purchases (by suppliers) the implication is that there will potentially be a lot of futures buying as mills hit the deadline of their “on call” contracts, fix the price, and the associated short hedges are bought back.  We have seen this before in the last few years.  There was a lot of thinking that on call buying would support or lift cotton prices during during 2013, 2014, 2017, 2018, and 2019.  Many of these historically large discrepancies between unfixed call sales and purchases appeared to resolve themselves without explosive rallies.  Perhaps this was because the reported sales were not true biz to biz sales, e.g., they were consignment sales within big merchant shippers.   On the other hand, the fixations of record high level of unfixed call sales for the Spring 2022 contracts appeared to contribute to the upward price volatility through mid 2022.

Since the fall of 2024, the opposite situation has been going on.  In absolute terms, unfixed call sales (by mills) are at an historically low level, reflecting the cautionary buying on the demand side.  In terms of ratios, unfixed call purchases (by suppliers) outweigh unfixed call sales by almost two-fold across all contracts, as of March 14.  In the nearby May’25 contract the imbalance is similarly in favor of unfixed call purchases.  The implications of that imbalance are excess selling pressure on ICE futures when those May-based on call positions are fixed.