ICE Cotton futures gained almost 100 pts this week basis the N4 to settle at 93.25 c/lbs. Thursday was the soon-to-expire K4 contract's First Notice Day, which was preceded by a large drop in OI via EFP and EFS transactions, rumored to be either against on-call fixations or the changing of hands of the cert stock, outside of the official delivery process.
In either case, the K4's drop versus N4 prior to FND allowed merchants to delay bringing any available supplies to the board. Export sales this week were strong for old crop, the result of motivated sellers of low grades ahead of the inverse, even as basis levels remain challenged and futures attempt to ration demand. West Texas received moderate rain over the last week, but more is needed. Talk of El Nino reducing the monsoon in India should support Z4 as well. In the macro markets, the Dollar Index remains range-bound just under 80, while the GSCI has leveled out. Grains had a solid week, due new crop weather and, in the case of soybeans, old crop rationing despite continued talk of Chinese cancellations and a ramp up of Brazilian shipments. Russia and Ukraine continue to make headlines, but with a more muted impact of late. In Europe, the ECB discussed conditions for further monetary easing, and China announced 80 new infrastructure projects. Tight monetary policy is not yet here.