Hedge funds made a record bearish bet on cotton just before prices extended falls to a three-year low.

Futures traded in New York fell to $ 0.662 per pound on Friday, the lowest level since June 2016. Just three days earlier, money managers expanded their net bets on price declines. It was the third week in a row that the bearish position hit a new record.

The market is suffering from a large oversupply. U.S. inventories are projected to reach a maximum of 12 years in the 2019-2020 season. Meanwhile, U.S. shipments still face tariffs from China, the world’s largest consumer. Even this year’s long plantation delays and heavy rains from Barry in the Mississippi Delta, a key growing region, have not been enough to rescue prices from stagnation.

“I don’t see why the specifications would change,” said Peter Egli, director of risk management at Plexus Cotton. There are “many strikes against cotton,” he said.

Cotton fell nearly 30% in the past 12 months and is among the worst performers in the Bloomberg Commodity Index, which records returns for 22 components. Slow global economic growth has eroded demand. The U.S. Department of Agriculture cut its 2019-2020 projection for worldwide use by 0.8% on Thursday and increased its outlook for global inventory by 4.1%.

In the week ended July 9, investors’ net short position expanded 11% to 41,727 futures and options, according to data from the US Commodity Futures Trading Commission released on Friday. . The share, which measures the difference between bets on a price increase and bets on a decrease, was the most bearish since the data started in 2006.

Despite inventories piling up, there are still plenty of things that can go wrong with this year’s crop, and that could quickly undermine the negative sentiment.

Delays in planting have stunted normal development. Only 47% of US crops had reached the so-called quadrature stage, the growth period prior to flowering, as of July 7, according to Usda data. That’s down 10 percentage points from last year and follows the five-year average. In Texas, the largest producer, the figure was 11 percentage points behind last season.

Meanwhile, fields in the southern parts of the Mississippi Delta region could be greatly affected by Barry. The storm made landfall in Louisiana on Saturday, unleashing a deluge and strong winds. It could be several days after the rains clear before the extent of damage to the plants is known.

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