ICE Cotton had its best week since August, gaining almost 400 pts to settle at 83.22 c/lbs basis H4. The USDA WASDE release on Tuesday was a non-event – failing to include an increase in US exports as had been expected by many – but the market may have been relieved at the lack of any overly bearish adjustments.
Cert stocks continued to decline to under 60k bales this week, with newly delivered stocks coming from old crop rather than newly harvested cotton. US Export Shipments have finally picked up and sales this week were better than expected. Export demand has slowed on the run-up this week, but bids remains under the market and reports from many mills around the world are positive.
Managed money increased its net long position by almost 9,000 contracts through Tuesday, and this likely continued during the week as trend-followers jumped on board and the lack of bearish news helped the market rebound from an over-sold, low-open-interest environment.
Developed market equity indices keep setting records and all eyes will now be on the FOMC meeting that wraps up next Wednesday. The surprising bi-partisan agreement reached in the US Congress looks likely to avoid a re-run of October’s government shutdown, which should reduce some uncertainty for the Fed.
Wrangling over the debt ceiling has kept enthusiasm in check, however, and most analysts still don’t expect tapering to be announced next week. In the short term. the USD Index has remained close to 80 allowing copper, oil and gold to hold above recent lows. Broad investor sentiment towards commodities remains overtly negative though which could cause index fund outflows in the medium term.
