Pressure Remains on the Cotton ETN

The iPath Bloomberg Cotton Subindex Total Return ETN (NYSEArca:BAL) is among the commodities exchange traded products getting drubbed this year. BAL is off more than 9% over the past month and labors 21.2% below its 52-week high, putting it in bear market territory.

Data suggest some commodities traders are remaining bearish on cotton, potentially putting more of a squeeze on the already faltering BAL. The cotton market has remained depressed for years on uncertainty over large Chinese state reserves as Beijing hoarded cotton to build up a price support program for farmers India, the largest cotton producer, has imported bales to restock after heavy exports last year. Indian farmers have also suffered through damaging pests and late monsoon rains.

“A look at the most recent Commitment of Traders report shows that large speculators reduced the size of their net-long position by almost 1/3 during the reporting period ending June 20. The reduction of the non-commercial net-long position by over 25,000 contracts last week reduces the overall net-long position to just over 59,000 contracts. Commercial traders were mainly on the other side of the large speculators’ trade, having reduced their net-short position by over 27,000 contracts to net-short 57,700 contracts,” according to OptionsExpress.