The cotton market was sharply lower Wednesday, as long liquidation in spot December accelerated. This action stems for the fact December cotton enters delivery on Friday, but all spot month participants must exit by Thursday’s close. Coming into Wednesday morning the spot open interest was in the order of 23,000 or so contracts.
With Wednesday’s estimated volume at 56,462, one would assume a huge portion of that particular has been reduced. On the close Wednesday, the December/March Spread posted a new low for the move of -205 December under March.
Additionally, with Wednesday’s heavy volume and bearish action, one would assume the speculators are increasing their long-standing short position. Recently, their amount increased from 4,000 contracts short to 15,000 contracts net short. Supposedly, a new total will be reported this Friday on the CFTC website. Perhaps, a fundamental driver Wednesday was President Trump’s comments on potentially increasing U.S. tariffs on China.
Thursday, USDA will issue its latest sales and exports data, which will be a key piece of information. Last week’s number were the best of the season, and most likely new sales are being generated on this break.
For Wednesday, December cotton settled at 62.24 cents, down 1.20 cents, March ended at 64.28 cents, down 1.07 cents and December 2020 finished at 66.99 cents, down 0.96 cent.