The market continued to move sideways to higher, depending on which month we are looking at. While December closed within its narrow 66.42 to 69.05 cents range of the 27th consecutive session, the widening spread has allowed March to display a steady uptrend over the last couple of weeks, settling today at its highest level since October 2008.
The liquidation of the December contract continued in an orderly speedy fashion, as only 12,444 contracts remained open before today's session. Total open interest finally declined by about 25,000 contracts its recent high of 194,000 contracts, but it has still held up considerably well during this liquidation period as speculators maintained a keen interest in cotton.
With March now assuming the spot month position at 73.00 cents, it may take a while of the market to digest this extra 400-point jump in the futures price. In just seven weeks, since October 2nd, the spot month has advanced by no less than 1200 points, which is difficult to swallow f most mills. However, a lot has happened during these seven weeks, as the Chinese crops have suffered weather related setbacks the trend of outside markets has acted in support of higher cotton prices .
While the quality issues of the US crop are already well known by the market, we have just received the first snapshot of the Chinese crop. According to the China Fiber Inspection Bureau, only 79% of the 2.8 million bales classed. Only 54% had mike readings between 4.3 and 4.9, compared to 77% a year ago. Although the statistical sample is still small, it seems to confirm that we are dealing with a below average crop in China this season, both in terms of size quality.
The Chinese government has announced another auction of 500,000 metric ton to keep the local market under control, digging deeper into its stockpile. This on-going depletion of Chinese stocks creates a lot of future support, as the Chinese government will probably want to refill its strategic reserve once international prices become more attractive again.
The liquidation of the December contract continued in an orderly speedy fashion, as only 12,444 contracts remained open before today's session. Total open interest finally declined by about 25,000 contracts its recent high of 194,000 contracts, but it has still held up considerably well during this liquidation period as speculators maintained a keen interest in cotton.
With March now assuming the spot month position at 73.00 cents, it may take a while of the market to digest this extra 400-point jump in the futures price. In just seven weeks, since October 2nd, the spot month has advanced by no less than 1200 points, which is difficult to swallow f most mills. However, a lot has happened during these seven weeks, as the Chinese crops have suffered weather related setbacks the trend of outside markets has acted in support of higher cotton prices .
While the quality issues of the US crop are already well known by the market, we have just received the first snapshot of the Chinese crop. According to the China Fiber Inspection Bureau, only 79% of the 2.8 million bales classed. Only 54% had mike readings between 4.3 and 4.9, compared to 77% a year ago. Although the statistical sample is still small, it seems to confirm that we are dealing with a below average crop in China this season, both in terms of size quality.
The Chinese government has announced another auction of 500,000 metric ton to keep the local market under control, digging deeper into its stockpile. This on-going depletion of Chinese stocks creates a lot of future support, as the Chinese government will probably want to refill its strategic reserve once international prices become more attractive again.
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