The cotton market is sharply lower Thursday over the arrest of a top Chinese technology executive in Canada. The arrest was made on behalf of the U.S. as a violation of the Iranian trade sanctions. This new controversy comes on the heels of the U.S.-China trade truce, and potentially threatening to undo the agreement. Beside cotton’s weakness, most other markets are sharply lower as well, including the Dow Jones, which is off some 400 points.
Thursday is the expiration day for the December 2018 contract. There were 32 additional deliveries. Term Commodities issued 4 and JP Morgan issued 28. All were stopped by SG Americas. The final settlement for spot December could result in a lower switch-of-contract gap on the continuation chart. Such a lower close might compel March cotton to trade down and fill that gap. Thus, December’s final tick today may potentially influence the market during the coming days.
Weekly sales and exports are delayed until Friday, a result of Wednesday’s national day of mourning for President Bush. It is hoped China will soon be seen listed as a net buyer of U.S. cotton. To that end, word of an agreement between China and the U.S. over autos, energy, and agriculture has been hammered out in the past 48 hours. This is expected to bring immediate results in increased U.S. exports of Cotton and LNG.
The Foreign Agricultural Service is reporting Chinese imports are higher year-over-year. For the past 12 months ending July 31, imports have risen from 5.70 million bales (mb) to 6.90 mb. The movement ought to be affirmed in next week’s December supply-demand data from USDA.
For today, close-in support for March cotton is 79.50 cents and 78.87 cents, with resistance at 82.00 cents and 83.50 cents.