DTN Cotton Close: Higher in Knee-Jerk Trade

Photo: Nick McMichen

December cotton finished mixed even though USDA dramatically lower the 2018 crop. Production for the U.S. was cut 1.35 million bales, the largest one-time decline we have seen in years. Currently, the crop stands at 18.35 million bales versus October’s 19.76 million. Additionally, India’s crop was lowered 700,000 bales and Pakistan some 500,000 bales.

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However, USDA drastically lowered exports 500,000 as a causality of the trade war with China. Now, potential for exports are 15.00 million, down from the previous 15.50 million.

Also, in Thursday morning’s weekly sales and exports data, China cancelled another 58,000 bales. Summarily, if there are two sides to every story, certainly the demand story is not very compelling.

Initially, the reaction to the report was friendly. Spot December traded to the 80.50 cents level, but when doubt about demand began to seep into the trade, prices stalled. Soon thereafter, disappointment turned into panic, prices retreated all the way to bearish on the day.

In other news, the Federal Reserve left interest rates unchanged today, but set the stage of a December hike. This action caused the U.S. dollar to strengthen, which is nearly always cotton-negative.

December cotton settled 79.01 cents, up 0.05 cent, March at 80.54 cents, down 0.03 cent, Red December 78.51 cents, up 0.26 cent. Today’s estimated volume was 64,400 contracts.

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