For the week ending November 11, Dec’16 ICE cotton gyrated up and down around the 69 cent level. The latter gyration was more amplified as a roughly three cent rally on Thursday and early Friday peaked at 71.44 cents per pound before declining almost three cents. Friday’s settlements for Dec’16 and Dec’17 ICE cotton were 68.44 and 68.87 cents per pound, respectively. A 70 cent call option on Jul’17 settled Friday at 4.24 cents per pound (down from 5.09 cents two weeks ago). Chinese cotton prices and the A-Index of world prices were both mixed this week.
Cotton specific news included neutral/slightly bearish supply and demand numbers from USDA, and a slightly improved export sales report, which maintained the expected price quantity demand relationship. Major outside influences included the post-election financial disruption and recovery, which saw the U.S. dollar trading higher during the latter part of the week.
Current marketing strategies to consider might include combining one’s sold (or committed) 2016 crop with call options on Jul’17 ICE cotton. For example, while a 70 cent July call is still a little expensive at over four cents per pound, a 70:76 July call spread would cost about half that.