Weekly Commodity Market Recap: Cotton

New York cotton futures finished their third straight week of declines on cues from outside markets, falling to the lowest weekly close in more than two months. This marked the third consecutive week of lower closes, the longest such streak since a four-week losing stretch that ended March 6.

Nearby prices closed Friday at 56.30 cents per pound, hampered by weaker signals from traders and declines in outside markets. First, the weekly Cotton on Call position report from the CFTC showed a decline in total unfixed call sales to 44,188. This came primarily from the most-traded December contract, where unfixed call sales retreated 533 contracts from the previous week’s record high to 17,253.



















Also, the latest spec/hedge report from ICE Futures U.S. added to the glum mood over the market last week. The spec/hedge report for the week ending August 24th showed speculators reduced their net long position from 12.2% to 8.7%. Overall spec longs likely sold their positions to the trade, as spec longs reduced their position by 6,057 contracts to 49,476. Finally, the latest net futures position from the CFTC’s Commitments of Traders report dipped to 24,004 contracts Friday, its lowest weekly close in almost two months. All three gauges substantiate the decline in futures in the latest week.



Outside markets also weighed on cotton prices in recent days. Wheat and corn prices are flirting with multi-month lows, while synthetic fiber prices in China are swooning from near-term highs set a month ago. Nearby wheat futures fell to $4.60 per bushel last week, down each of the last three weeks in step with lower cotton prices. Corn prices fell for the seventh time in the last nine weeks, down to $3.21 per bushel. Even prices of synthetic fiber feedstocks eased in the last week, dampening prices for purified terephthalic acid (PTA) on China’s Zhengzhou Commodities Exchange. Economically speaking, PTA is a substitute good for cotton, meaning fluctuations in prices here tend to mirror changes in cotton prices. As a derivative of oil and an ingredient in polyester production, lower PTA prices point to lower cotton prices. PTA futures dipped for the second straight time last week, down to 7,684 yuan per metric ton (51.0 cents per pound). Despite the lower close in cotton prices this week, we are still friendly to this market, and believe we are near the bottom of our range.