Chart of the day - COTTON (24.07.2024)

Agricultural commodity prices on the Chicago Commodity Exchange (CBOT) have been mostly declining in recent months.  Non-commercial investors (large hedge funds, institutions, large individual speculators) maintain overwhelming net short positions in CBOT Grains according to Commitment of Traders data (as of July 16, 2024) of more than -517,000 contracts, while at the same time commercial investors (producers and supply hedging companies) have high net long positions. In broad terms, commercial firms are increasing net long positions, while speculators are adding short positions, indicating a continuation of the downward trend. Cotton futures are among the most 'battered' among agricultural commodities this year.

• Cotton (COTTON) futures traded on ICE are losing nearly -1.7% today, slipping to levels not seen since 2020. Since local peaks in July, the decline in cotton prices has now reached almost -10%. Record high (14% y/y increase to 11.67 million acres) acres of cotton planted in the United States (mainly in Texas, Georgia and Arkansas) and favourable weather, stronger US dollar and dropping oil are supporting lower cotton prices.
• Supply-securing commercial investors on the Chicago Commodity Exchange, which serves as a benchmark for the broad agricultural market, have added long positions in CBOT Grains, signalling that the broad downtrend in 'soft commodities' is potentially not over yet; large speculators are also adding short positions, hoping for a continuation. 
• In cotton, however, the latest Commitment of Traders (CoT) report indicated a slow unwinding of long positions by commercial traders, who have begun to sell cotton, while large speculators have added relatively little - only 217 contracts to their short positions in cotton, now totalling -19,741 contracts.
• Yesterday's Crop Progress report said that the progress of the US cotton harvest has increased to 81%, that's 5% faster than the historical average. Also, the ripening process is going very smoothly, thanks to good weather increasing supply; 42% of the US cotton crop was ready for harvest, 8% above the historical average.
• Also, last week, cotton crop conditions saw a significant improvement, according to the NASS report. The cotton crop improved by 8% (good/excellent rating) and now accounts for about 53% of the total crop. As of the last reported date of July 19, cotton stocks, on the ICE exchange, were down slightly by 279 bales, to 40,140 bales in total. 
• Despite a lot of positive news currently discounted in low cotton prices, if the next CoT report indicates further selling by commercial investors, with a potential reduction in short speculative positions, we could see a rebound and a return above $70.

The trading volume for the session was notably active, with 37,135 contracts traded, the highest this month. The previous day saw 21,110 contracts cleared. Total open interest has increased for 14 consecutive sessions, bringing the total to 221,016 contracts. Certified cotton stocks began at 38,466 bales, down by 1,674 bales..

COTTON (D1, M15 interval)

Cotton futures are in a strong downtrend and have already slipped nearly 65% since local peaks in 2022 near $160. The last significant price reaction from 2020 is near $60.  Today, ICE Cotton futures volume was at the highest level since the beginning of July, with more than 37k contracts traded (21k yesterday)

Cotton (COTTON) contracts, on ICE, hit new local minima today.

Source: xStation5