The week ending September 9 saw a sharp decline in ICE cotton futures in apparent reaction to modestly bearish, but perhaps still surprising U.S. supply and demand projections from USDA. Monday’s three cent decline was followed by a narrower sideways pattern for the rest of the week. The Dec’16 and Dec’17 contracts settled on Friday at 67.28 and 67.97 cents per pound, respectively. The A-Index of world prices followed a similar pattern to New York futures, while Chinese cotton prices had a more static pattern week.
Other cotton specific news include an export sales report that was much more modest, but still in keeping with the expected price quantity demand relationship.
The value of Dec’16 put options at meaningful strike prices is something to consider while futures remain around 68 cents. For example, a 70-63 put spread cost around three cents per pound on September 16.