DTN Cotton Close: Sharply Higher on Production Fears

December cotton closed up 200-plus points on Monday as traders finally awaken to the fact yields across the cotton belt will be greatly diminished into late harvest. After being tormented all season by droughts, rains, hurricanes and freezes, the crop will be dramatically curtailed in USDA’s November supply-demand report.

Additionally, Monday’s trade saw all contracts close above the 80-cent mark for the first time since summer. Thus, not only was Monday’s settlement a financial improvement to the market, but a psychologically boon as well.

To that end, Monday’s estimated volume was 40,500 contracts, the strongest volume since the October 1’s low of 47,700 contracts. We also note open interest is on the rise, suggesting the sold-out speculators are wading back into the long side of market.

Monday afternoon, USDA will report on the pace of harvest and the condition of the crop. Last week, Georgia was rated at 54% poor, very poor. Texas too may see some backwardation in its crop due to the wet, snow, and freeze conditions of last week.

December cotton settled 80.02 cents, up 210 points, March was 81.45 cents, plus 209 points, and Red December finished 77.58 cents, up 90 points.

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