Cotton futures are testing the $73 per bale area, ahead of today's Commitment of Traders (CoT) report, which will be released at 8:30 PM BST. Also, wheat, corn and soybean may be volatile ahead of or after the report.

  • Higher oil should support cotton prices (lowering demand for its substitute, polyester), but on the other hand, a stronger dollar is not good for cotton
  • So far, the market has not priced in particularly optimistic stimulus treatments in the Chinese economy, which in theory should be a positive driver for prices
  • It's still unclear how much damage Hurricane Helene did to U.S. crops (the USDA WASDE report isn't due until October 11); behind-the-scenes talk is of as much as 300,000 to 500,000 bales of crop loss 
  • Another Hurricane Kirk is currently forming in the Atlantic and is likely to reach the US East Coast on Sundays
  • Bad weather circumstances for US cotton (Mississippi Delta, Georgia, Florida) came at the worst time i.e. harvest season

The latest CoT report indicated further indecision in the cotton market; Managed Money positions indicate a similar sized increase in both long and short positions, while Commercials (hedgers) continue to hedge against price declines. This time, the withdrawal of a sizable number of short positions from Commercials and Fund Managers, could be a positive signal for cotton, heralding a structural change, ahead of (perhaps) a further upward trend. Along the way of the 'bounce' from the $67 per bale level, cotton has managed to defend gains several times, resisting strong downward impulses. The key psychological support zone is $70 per bale.

Source: xStation5

The latest CoT report. Source: CFTC