Cotton Market Month Contract Delisted

New York futures closed up this week, dropping 171 points in July to 80.80 cents, while in December it rose 35 points to 79.42 cents.

An excellent export sales weekly was released this morning, but the market showed no signs of excitement, and the market price was suppressed all day.

In the past six trading days, we saw not only the deterioration of some technical indicators, but also, after last week's trading, the market momentum was in an impasse, but it seems that spot prices also suffered strong resistance.

In the past two weeks, the sales of American upland cotton and Pima cotton were less than 1 million 360 thousand packages in the two market years, and only 853, 1, 000 packages were purchased in China alone.

Most of these sales come from existing stocks. According to our calculations, cotton is basically sold out this year.

Certification inventories continued to decrease, but the rate of reduction was lower than market expectations.

As of this morning, there are 766 to 1 and 728 bales of cotton stock, but this figure is likely to drop sharply in the next few weeks.

However, the market certification inventory represented by the July contract is that the price has risen too high and the spot cotton price is 92/93 cents. Because of the current price upside down, we can not make use of cross crop annual arbitrage.

Therefore, even if the certified stock is reduced to only a few hundred thousand packages, the remaining mixed cotton stocks will still be hard to find.

Therefore, the potential explosion of the July contract is rapidly disappearing, as the remaining empty volume is less and less.

This morning, the volume of empty contracts in July has just exceeded 20000 hands. In today's paction, the volume of empty contracts in July continues to decrease.

By the end of last Friday, the number of sales at any time that was not priced in July was only 5. 1; 919 hands may now have dropped to a very low level.

It appears that the catalyst for the short squeeze market is slowly but surely disappearing, and the July contract may withdraw from the market without any showing off.

Finally, all market participants may smile and say goodbye to the July contract.

Speculators and index funds are very happy because they will extend their heads back at a discount price.

Cotton traders are also happy because the spot market is strong, they sell their long positions at a profit level (sell / buy futures), textile mills are also satisfied, the recent prices fall, and they lock most of the remaining sales contracts at acceptable prices.

This is a great thing. Although cotton is basically sold out this year, the market remains calm and orderly.

It seems that in the few remaining years of the year, whatever happens in July, doesn't matter, because most of the July contracts have been processed.

At the end of the year of the market, there seems to be no stock of worry about the old cotton, and the textile factory has added enough sources, and from now on, the new cotton will enter the market.

Speaking of new cotton, at present, the world's new cotton is growing well. Only China has exceptions. So far, China's cotton growing season seems to be full of challenges.

In the past few years, cotton has been the best start this year. In our memory, cotton growth in Dezhou has never been as good as this year.

Although most of the estimates suggest that Dezhou's cotton output is about 8 million bales, there is evidence that the output could be much higher than expected, perhaps up to 10 million bales.

This is a great starting point, with low abandonment rate and intermittent precipitation.

We know that there will be many problems during cotton growth, but once cotton grows to the knees, the vitality will be strong and not easy to die.

Therefore, we expect that in the next few months, the US cotton production forecast will be greatly improved.

The US Department of agriculture now estimates that the output is 16 million 700 thousand bales, but we believe that the output of the United States is likely to reach 1850-1900 packages.

Not only has the planting area expanded by 200 thousand -30 acres, but from now on, the abandonment rate is lower than the average abandonment rate, and the average yield of Upland Cotton in the United States is expected to exceed 806 pounds.

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So what will we do? The July contract has basically become history. From now on, whatever happens, it will only reduce the impact on the overall market, because the volume of contracts in July is very small.

Now, the market is obviously concentrated in the December contract. Because of the massive sell-off of the growers, the December contract is trying to break through the resistance of 80 cents.

Unless speculators are willing to buy large sums of money and sell all the trade, the December contract will probably return to the current price level, because the US cotton production is bigger.

Although this may be the fifth consecutive year of world production below consumption, we must bear in mind the seasonal trend.

From now on, there will be a few months for new cotton to go on sale.

In addition, very important markets, such as China, Turkey or Pakistan, will have domestic cotton available, while the US will have to cope with higher yields, and the US government will not help.

Given that the current price level is quite high, we expect that some price pressures will be observed during the month of November. After that, the supply will be tight again by the end of 2010/11, providing support for strong prices. -4