Thursday Cotton Bullets – 05/08/2021
Just Do It
CTZ21 90.68 (+0.37)
CTH22 90.39 (+0.38)
CTK22 89.79 (+0.35)
CTN22 88.61 (+0.32)
Zhengzhou CF109– 17,185 (+5)
Cotlook “A” Index – 98.40 (+0.25) – 4th August
Daily volume – 17,967
AWP – 78.47
Open interest – 249477
Certificated stock – 91,059
Dec/March spread – (+0.29)
September Options Expiry – 20th August 2021
December Options Expiry – 12th November 2021
December 1st Notice Day – 23rd November 2021
– Yesterday, at EAP were very much inspired by Liverpool’s very own Katarina Johnson-Thompson determination to finish her race at the Tokyo Olympics in the face of outstanding obstacles (https://www.eurosport.co.uk/athletics/tokyo-2020/2021/tokyo-2020-olympics-brave-katarina-johnson-thom-hobbles-to-finish-after-devastating-injury-during-20_vid1521317/video.shtml). Today, we were reminded of this by our own struggles to produce a market report in the face of such a lack of cotton market events!!!!
– We may be, “perhaps”, guilty of over dramatizing our own challenges, but it is true that the market is searching for a development to give it a more purposeful direction. The lead contract Dec ’21 closed today up 37 points at 90.68 and, once again, we look to see if 90 can hold. For two weeks we have had a closing range of 89.39 to 90.68 (today’s close) and the market very much needs an event to break the torpor.
– In China mills are now armed with import quotas and are focusing their attention on the consignment stocks in the port free trade zones. There were about 600-700,000 MT in warehouse prior to the release of quotas. Whilst it is too early yet to estimate the total volume of sales so far, the pace has been reported as brisk. At the same time, the excellent offtake of the, higher priced, reserve stocks continues and the total sales to date now stands at 228,946 MT.
– The global cash market has turned extremely quiet, especially for nearby shipments. There are a number of reasons for this, first of all there is, quite simply, very little cotton for available for nearby shipment and what there is quickly finds willing buyers. Secondly, recently some consuming nations, notably Bangladesh, Indonesia and Vietnam, have implemented complete or partial lockdowns, which has curtailed mill operations and caused a short-term hiatus in demand for cotton, even though the mills are making good money and would much prefer to keep spinning. Finally, as the market has, so far, failed to hold above the 90 cents level for a protracted period of time, and with the US crop seemingly increasing in size, some mills are playing a waiting game in the hope of better opportunities to cover their needs. Nevertheless, mills globally report positive yarn margins and strong end user demand. As quiet as it is, it does not appear that the good times are over for the spinning community!
– As we look to end user demand the below chart of Nike stock offers a positive picture. After posting excellent sales numbers at the end of June the stock has not looked back. Of course, being a sportswear brand, many Nike products rely on synthetic fibres rather than cotton, however, Nike’s recent performance is an extremely encouraging indication of the consumers’ demand for apparel.
– This week’s CFTC Cotton on Call Report is based positions as of 30th July and showed the first week on week decline in the December net on call sales position since December replaced July as the lead month. Overall, current crop net on call sales still increased very slightly to 98,250 contracts. Still the second highest ever for the equivalent week of the year and, still closing in on the all-time high position of 106,063 contracts.
– The USDA export sales report reflected the above-mentioned slow pace of sales with combined sales of 166,400 bales for the 20/21 and 21/22 crop years. Exports of 229,500 bales take total exports to 16.052 for the marketing year and, with this report dated just three days prior to the new MY, the USDA estimate of 16.4 million bales of US exports for the season will have to be adjusted down.
The Cotton market continues to meander between 83 and 91c/lb which it has done for the best part of 2 months and for the time being looks to continue this sort of sideways trading action. Weather will be key to what happens in the weeks ahead and in the event prices can overcome the mid 90’s we may see some explosive price action that sees Cotton move into the 100’s being an area we have not seen for nearly 10 years!
*Please note that we only share CFTC CTO on weekend reports.
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