Weather continues to be a potential issue in the North Delta, with locally heavy rains causing isolated problems, despite overall excellent conditions in the region. Cotton has historically exhibited a very low correlation to both stocks and bonds, making it a potentially appealing option for investors looking to smooth overall portfolio volatility.
The Dec — Mar spread weakened on the week, but remains at far less than full carry at 36 points. The market again found support this week just above its recent lows. The latest on-call report from CFTC evinces that mill fixations of outstanding basis purchases have continued to lend support to our market. Too, the market reacted positively to the recent tentative US — Mexico trade agreement and the likelihood that a US — Canada agreement is nearing completion.
Weather continues to be a potential issue in the North Delta, with locally heavy rains causing isolated problems, despite overall excellent conditions in the region.
Like the Southeast, the most troubling potential issue is rain on partially open bolls leading to boll rot, but the 5-day forecast looks favorable for drying and opening. Demand for US cotton for export increased somewhat over the most recent sales period.
We think that the recent religious holiday associated with the Muslim faith likely affected sales figures put forth this week. However, China continues to be a major purchaser of US cotton. Consider fixing cotton at or above 85, but go into harvest with free cotton to sell on rallies that approach 90 or if basis improves for higher grades. Important stories to watch in the next few weeks include progress on trade talks, the likelihood of a farm bill by months end, and the September WASDE.
Hedging a crop with options is the single most effective thing you can do to reduce risk and improve the odds of being in the game when profit potential presents itself. For next week, the standard weekly technical analysis for and money flow into the Dec contract remain bearish, but the market also remains in something of a technically oversold condition. A significant amount of physical support likely remains under the current market.
Further out, Farm Futures magazine has projected, via its preliminary survey, area committed to cotton of more than As the winter wheat planting season approaches across the southern US amid a bear soybean market, we can envision a plausible scenario for US cotton acreage sown to cotton to be significantly above 14M acres.
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Daily Price Limit - 3 cents above or below previous day's settlement price. Spot month - no limit on or after first notice day. Trading Hours - See Cotton Futures. The nearest ten delivery months will be available for trading. Last Trading Day - The last Friday which precedes first notice day for the underlying future by at least five business days. Automatic exercise at one tick or more in-the-money at expiration on last trading day.
There is a substantial risk of loss in trading commodity futures and options. Past performance is not indicative of future results. A movement in the cash market would not necessarily move in tandem with the related futures and options contract being offered. European investors have more options ETF available for cotton exposure, as ETF Securities offers short and leveraged cotton products as well.
Though the market for cotton futures is not nearly as large as certain other commodities, there is sufficient liquidity available for investors with the sophistication and ability necessary to invest directly in futures contracts. Cotton futures are traded on the ICE under the symbol CT, with each contract representing 50, pounds net weight of cotton that meets certain minimum standards of basis grade and staple length. Futures contracts are priced in cents and hundredths of a cent per pound, and contract months include March, May, July, October, and December.
These contracts are also for 50, pounds, and trading is conducted in the March, May, July, October, and December cycle for the next 24 months. For some commodities, it is possible to gain indirect exposure to the resource through an investment in companies that are engaged in production.
This is challenging in the case of cotton because many growers are small farms or private entities, and as such not open to direct investment. There are, however, some options available. There are also many agribusiness firms that provide products and services to farmers, and the profitability of these companies often shows a correlation to agricultural spot prices.
These certainly are not pure play on cotton, but present another option for investors looking to gain exposure. Subscribe to receive FREE updates, insights and more, straight to your inbox. Commodities Softs Cotton Cotton.
Regular Options: March, May, July, October and December; Serial Options: January, September and November. The underlying future for the September and November serial options is the December futures contract; the underlying future for the January serial option is the March futures contract. Free intra-day Cotton #2 Futures Prices / Cotton #2 Quotes. Commodity futures prices / quotes and market snapshots that are updated continuously during trading hours. MidCurve Options: Eurodollar Mid-Curve options are short-dated American-style options on long-dated Eurodollar futures. These options, with a time to expiration of three months to one year, have as their underlying instrument Eurodollar futures one, two, three, four or five years out on the yield curve.
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