The week ending September 23 saw a steady climb in ICE cotton of roughly four cents before leveling off on Thursday and declining on Friday. The pattern of higher prices, volume, and open interest suggested a slug of fund buying which was confirmed (at least through Tuesday) by the CFTC. The A-Index of world prices and Chinese cotton prices trended higher most of this week, although a decline in the Chinese market on Friday (Beijing time) may have influenced the price weakness on the ICE.
Cotton specific news included some concerns (expressed in this news story) about the potential impact of continuing rainy weather over Texas. This is feeding a larger story of rain delayed harvest, although the cotton yield and production implications of West Texas rains are unclear. (With grain crops, the extra rain is resulting in higher yields and price weakness.) Other cotton specific news include a decently strong export sales report, 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 two cents per pound on September 23 (and was worth three cents one week earlier).