December cotton is timidly lower Friday after its tumultuous reaction to USDA’s November Crop Report. In that release, the agency severely reduced the 2018 crop by some 1.35 million bales. That slash took the size and scope of the crop from 19.76 million bales down to 18.4 mb. Additionally, USDA lowered India by 700,000 bales and Pakistan some 500,000 bales.
Initially, the ICE Futures shot higher on huge volume, but by sessions’ end, prices were barely positive. Unfortunately, the trade war with China is casting too great a bearish cloud for the market to hold a bullish response. So there is more than a modicum of hope riding on the U.S.-China trade talks at the G-20 meeting late this month.
Another big negative is the U.S. dollar. Thursday, the Federal Reserve indicated it would raise interest rates next month. It is a given a rising dollar is a huge impediment to agricultural exports, especially cotton.
December options will expire today. The 79.00-cent level seems to be a pivotal level to watch.
Even with some upbeat economic data from China on Thursday, Asian markets are lower Friday morning, worried about the overall health of the world’s second-largest economy. An economic report released today said Chinese auto sales fell 12% in October from a year ago levels. Currently, the Chinese government is considering eliminating sales taxes on cars in an attempt to spur sales.
Support for December cotton will be 78.45 cents and 77.20 cents, while resistance is at Thursday’s high of 80.50 cents.