Indian textile mill to force the cotton price up American and Africa and the CIS (12.04)

New York cotton futures rose after the Thanksgiving Day once again fell short, but in March over the previous two weeks, still up 194 points to close at 43.60 cents.

Nov. 20 Market to close at 39.91 cents after the March contract to a larger rebound in just 5 trading day up 800 points Friday to close at Thanksgiving 47.91 cents. We believe that the market rise is mainly due to “mechanical” in nature, subject to adjustment in the world cotton price (AWP) / cotton futures price impact.

When the March contract transaction price of 39.91 cents in, week AWP price of 34.64 cents, the same day as the price of 33.21 cents. At that time, AWP / cotton futures price slightly higher than the 500 points for potential sellers, the price is too narrow, particularly the commitment of the Government of India in the next general election before the Spring Festival next year to support the local cotton prices. The seller from the market, the market opportunity for a rebound, with the price of cotton AWP price between a positive feedback loop. As a result, last week, AWP from 34.64 cents to 35.95 cents, and then again this week to raise 235 points to 38.30 cents.

However, long term, the adverse impact of foreign auto prices will not buy this enhanced program, only slightly higher offer from overseas, leading to the U.S. offer of the two factors were excluded from the calculation AWP. For example, in just 5 days of the rise in prices, MOT Memphis and prices both rose 850 points, India is only the price up 200 points, Pakistan and Tanzania, up 250 points, while Benin and Mali, the price rose 550 points. The five have been included in the offer AWP factor in the calculation.

In other words, the United States offer price index was excluded, the foreign bid into the price index, the market sooner or later will end up. The last three trading days so completely, so, AWP daily calculation of the price again fell below the value of weeks, and even today, before the limit to prove this point. This morning, AWP calculated on a price of 37.71 cents, compared with weeks when the price of 38.30 cents, after the sharp fall today, tomorrow the price will be calculated on AWP dropped. With the AWP once again fell into the channel, now began to exit the buyer, the seller will stick to the position further, to lock the period of relatively high prices of cotton.

The small rise is another sign of a lack of support is that when the market higher, the volume quickly evaporated, reduce the amount of disk space. In order to keep up, the needs of the market turnover volume of disk space and the expansion of both, but since the commodity bubble burst a few months ago, the cotton market is not more popular, especially the speculators have left the cotton market. Since the beginning of March, the amount of disk space a sharp drop in alone down to 302,683 from the district this morning, 131,260 single, quite shocking!

Now cotton futures market who have to hold this position? Only two groups against each other. According to the November 25 to the latest CFTC report, the index funds hold 6,700,000 packets net long position, holding the trade package 6,400,000 net short position. Traditional speculators to hold only 400,000 net short packets (1,900,000 packets directly to long and short of direct packet 2,300,000), and small speculators holding 100,000 net short positions package. As a result, the current traditional speculators out, index funds or actively (in the past 5 weeks to change the identity) is currently the basic trade in his one-man show.

This situation could explain why the market in the past 10 trading days in the rapid heating and rapid cooling. As a whole, trade was indeed look empty, but the option may be to see space strategy with a little too far, especially the signing of a number of options to buy short, forcing the trade in the AWP to all of a sudden start to take protective measures. Almost from the market because of speculators, index funds do not continue to liquidation of positions, so the trade can be likened to a circle around his tail of a cat until the market up to a certain height, to attract the seller admission, the unicum be the end of the game yesterday Disk space of a sudden heavy volume of more than 4,000 hands, as if the seller market.

In that case, how should I do? AWP believe holds the key to price movements, as the AWP convinced that fell into the channel, therefore, should once again test the market last month, the lowest price. However, the Government of India because of the role, India was forced to play the remnants of the cotton supply, therefore, pressure on prices in the near future may not be obvious to the mill of the United States, Africa and the Commonwealth of Independent States. Even if the textile mill in accordance with the reduced price level of procurement, the cotton market will provide adequate support, CIF price of the Far East will exceed 50 cents, in turn, AWP price will be locked into 32/33 cents, which in March cotton futures Will be able to maintain prices above 40 cents. Only when the CIF price fell below 50 cents, cotton futures market to open a new low-cost open a door.