Overnight, the ICE cotton futures have gained nearly a full cent as Tropical Storm Michael will turn into Hurricane Michael, and will make a beeline for the South Georgia crop. Right now, that crop is hugely vulnerable to destruction as some 90% of the bolls are open from mid-state down to the Florida boundary.
Producers have about one day, two at most, to gather what production they can until Michael’s arrival. He will make landfall as a category two hurricane, bringing 100 mile-per-hour winds and copious amounts of rain. Some cotton areas may expect up to 12 inches of rainfall. Supposedly, this storm will not linger, as did Florence over the Carolinas, but will move very quickly from Georgia into that same Carolinas.
Nonetheless, producers are expecting the worst, and rightfully so. It was one year ago, about this same time, that Hurricane Nate burst on the scene, zapping the southern crop. Eerily, it formed in the same location in the Caribbean, as has Michael, and followed a similar path. At any rate, Nate was the event that led to the 2017 harvest low.
However, most international cotton fundamentals remain generally bearish. To that end, with speculators somewhat in liquidation mode, they may use this Michael rally as an opportunity to exit. Thus, their selling might slow the bullish run.
For Monday, December cotton support is 7600 and 7537, while resistance lies at 7700 and 7790.