DTN Cotton Close: Futures Post Triple-Digit Gains

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    Nearby cotton futures post triple-digit gains to start the week.

    Cotton prices continue to be reasonably well supported in the mid to low 70s level, suggesting buyers are happy with that price, according to analysts.

    Monday’s close saw triple-digit gains in the first three trading months with March closing at 74.63 up 159 points, May closing at 75.17 up 150 points and July closing at 75.65 up 140 points. New-crop December futures settled at 71.92, up 73 points.

    Friday’s CFTC data showed noncommercials still bullish in cotton with 111,931 contracts net long as of Jan. 17, down 5,543 from the previous week. Informa Economics noted Friday that the large spec position is record large and is actually 2.3 times larger than it was at the same time in the 2010 crop year.

    A cotton analyst told me that the cotton market is caught between growing U.S. production estimates and growing U.S. and World demand estimates. “The biggest factor right now is the mills (buyers of cotton). They have bought basis only and subsequently have been caught with a massive short position on the board.” He added that it was his opinion that the specs know this and are going to squeeze this market higher.

    Earlier this month, the International Cotton Advisory Committee released their outlook for prices during the second half of 2016-17. They noted that world cotton production in 2016-17 is projected to rise by 8% to 22.8 million tons, which may put pressure on cotton prices in the latter half of the season. “World ending stocks may fall by 7% to 18 million tons in 2016-17, though stocks outside of China are expected to grow by 6% to 8.7 million tons.”

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