After getting beat down every day, the cotton market did manage a positive close Friday, albeit a small positive close. From last Friday to this Friday, the cotton market suffered an extraordinary loss encompassing some 13.00 cents or about a 12% decline.
Speculators have started to reduce their net long and it remains to be seen whether their exodus will continue or whether they suddenly find renewed interest in our market. A lot will depend on the macro situation and whether financial markets can keep their composure. So far investors don’t seem too concerned as they are still buying the dips.
It’s not just cotton. All commodities and the US stock market as well, are reeling from news of a new virus strain. Should growers be concerned? Yes. Will prices recover? Likely, but when and how much. And will the market fall further before a recovery?
The cotton market saw several of its contract months end at limit down Tuesday, amid growing fears over the omicron variant, plus disturbing comments from the Federal Reserve. Chairman Jerome Powell suggested that inflation was no longer considered transitory and that the Fed’s tapering process needs to be implemented quicker.
The ICE Mar cotton contract gave up 465 points on the holiday-shortened week, finishing at 111.78, with the Mar – May inversion strengthened at 185. Last weekend our models predicted a finish on the week that was to be near unchanged to higher Vs the previous Friday’s settlement, which proved to be incorrect.