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While open interest in many key commodity markets has pushed sharply higher over the past 4-6 weeks, cotton has seen a steady to lower trend for open interest. This would suggest that cotton is not as vulnerable as other markets to a downside price correction due to negative outside market forces. However, surprise thunderstorms moved through the Lubbock, Texas region on the weekend and left some areas with decent rain coverage. This would mean it may take hot and dry weather for a longer period of time than the next week to see much of a shift in crop conditions. The 10-day outlook calls for mostly dry and hot weather and this may help provide some underlying support today. December cotton closed just slightly lower on the session on Friday which seems like a bullish development given the collapse in grain markets, metals and other New York soft markets. The market managed to consolidate Thursday’s gains and avoided the aggressive fund selling seen in other markets. A somewhat threatening weather forecast for Texas and ideas that the world economy is on a recovery path helped to provide support on the early break. The Commitment-of-Traders reports on Friday showed a significant long liquidation trend from speculators, both large and small. Speculators were net sellers of 8,936 contracts for the week ending June 9th to a net long of 34,922 contracts. The selling trend is a short-term negative force. Demand factors like exports have been a positive influence to the market but the jump in the dollar could slow demand.
TODAY’S GUIDANCE: Weakness in outside markets and a surprise rain in key producing areas over the weekend should be enough to spark some increased selling over the short-term.
