The million dollar rain came. And cotton prices were on the defensive all week as prices moved lower by the day.
During a period when everyone predicted extreme volatility, the cotton market was calm. Possibly, this truly is the dark before the dawn.
Old crop prices slipped some 200 points on the week, and the new crop December contract settled marginally higher. Thus, the market was a wash during the week despite trading through triple digits most days.
Cotton prices settled 100 to 200 points higher on the week as bullish fundamentals continue to build and speculative funds add to their already bullish positions.
No need to get bearish now. Chinese actions and Mother Nature seem to feel the mid-80s is good for cotton prices. The question is – can Mother Nature tweak it higher?
Prices continue to be volatile and will likely remain so. Drought and a potentially smaller Chinese crop are adding value to the 2014 crop.
The significant price inversion between the old crop July contract and the new crop December has declined to only eight cents.
Last week’s market moves were little more than panic trading. One is tempted to call this a roller coaster, but that phrase does not conjure up enough drama for the current market.
The market is looking to move above 94 cents, then jump to 96 cents. Yet, I would not hold my breath looking for 98 cents. As to how much the new crop December might tag along with the May contract, the new crop will be led by weather developments, not old crop prices.
There are certainly no dull moments in the cotton ring as bulls and bears constantly face the threat of triple digit price moves.