New Special Study

EAP Statistical Market Analysis

Using V3 nearby data (V4 does not include the recent rise given it ends in June), prior to this season there have only been 5 other seasons where the cotton price has been above $1:

1994/1995
1995/1996

2010/2011
2011/2012

2021/2022
2022/2023

As you can see they come in pairs, without exception.

Here are the cotton continuation charts for the aforementioned seasons. There are 3 periods to consider being 1st Jan 1994 to 31st May 1996, 1st Jan 2010 to 31st May 2012 and finally the 1st January 2021 to 13th August 2022 noting this year finishes 31st May 2023.

Period 1 – Cotton continuation chart from 1st Jan 1994 to 31st May 1996 – a period of 29 months with breakdown of Z94, N95, Z95 and N96 charts over the same time period
Note how the market found support at 65c/lb in the January 1994, treble bottomed at the beginning of October 1994 and moving to a peak of nearly 115c/lb for N95 by end of May 1995 (8 months later) before falling back to its lows for N96 at just under 80c/lb some 6 months later.

Period 2 – Cotton continuation chart from 1st Jan 2010 to 31st May 2012 – a period of 29 months with breakdown of Z10, N11, Z11 and N12 charts over the same time period

Note how the market once again finds support from just under 63c/lb in early February 2010 with a near double bottom in Middle of July 2010 to a peak of just under 220c/lb for K11 by 2nd week of March 2011 (8 months later) before falling back to its lows for N12 in the mid 60’s nearly 12 months later.

Chart of Z10 from 1st January 2010 to 15th November 2010 – Note how the bull began on the 1st February at 68.55 c/lb and had a near double bottom at just under 73c/lb by the middle of July 2010.

Chart of N11 – 1 year

Note that the move up really began mid July 2010 ended about 8 months later in March 2011.

Chart of Z11 – 1 year

Note how the hangover of high prices lasted in what was the new crop Z11 contract until as late as the expiry of the Z11 contract and some 16 months after the bull really began

Chart of N12 – 1 year

Note how prices stayed in the high 80’s and 90’s until the end of April 2012 before collapsing into N12 expiry!

Period 3 – Cotton continuation chart from 1st Jan 2021 to 13th August 2022 – a period of 19 1/2 months with breakdown of Z21, N22, Z22 charts over the same time period

Chart of Z21

Note how the bull began in Z21 at just above 75c/lb at the end of March 2021 with a big bull move beginning 20th September 2021 from 88c/lb.

Chart of N22

Note how prices peaked at over 155c/lb for N22 by the 4th May 2022 after the move up from 88c/lb. For Z22 this was at 133.79 on 17th May 2022 (8 months later)

Chart of Z22 from 1st January 2022

Prices in Z22 have stayed high post the N22 high in early May and again are having a counter trend bounce following the bullish August WASDE

N.B.

Is the 22/23 market an even more volatile 11/12 market? We have certainly seen a more volatile bounce following the collapse from 133.79 to 82.54 than we saw in 11/12. Look at the above charts of Z11 and Z22 for confirmation of the fact! In Z11 we went from 91 to 115 by mid to end September then collapsed whilst we have gone from 82 to 120c/lb in Z22….Will we collapse again post mid to end September and the end of the hurricane season?

These are the headline numbers from each of those seasons:

This chart shows the path the price took in each season for easy visual reference. This chart is on tab 2 on the attached data spreadsheet.

As you can see from the data summary, in each of the second seasons, the ability of the price to stay above $1 was short lived. Just 35 & 46 days respectively. 2010/11 & 2021/21 both had extensive high price runs but all of the following seasons (and 1995/96) finished as inverse years. This is despite 2011/12 having the price bounce back above $1 a colossal 8 times that season.

So, if we assume this double season pattern will repeat again, as it has twice already, we can extrapolate backwards using the average % range for the seasonal movement which gives 23%, as we know the open we can calculate the close (104.77). This backs up the current thinking that this season will be inverse and as predicted back in March.

As usual of course, this analysis does not factor in any external influences currently affecting the market or any that events that will have an impact before next May.

Conclusion

As a conclusion, the current rally in Z22 should fail in the coming days and probably by the middle of next week. However if previous season price actions are to be respected then we should expect prices to stay in the 100’s to as late as April before dropping hard into the season close.

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