DTN Cotton Close: Fractionally Lower, Awaits Exports and Trade Talks

Photo: Jourdan Bell, Texas A&M AgriLife

The cotton market finished lower Wednesday amid very slow volume. Estimated volume was roughly 15,700 contracts, the smallest in two weeks. Of course, the market is in need of friendly news, which it did not receive Tuesday in USDA’s December Crop Report. Still, the government data was not negative enough to ignite fresh selling.

The hope of the market is that a trade deal be struck with China soon. As it stands, talks between the two sides are supposedly going well, but as the old saying goes, “no money has hit the table”. In other words, China needs to become an immediate buyer of U.S. cotton as it indicated it would do at the outset of the 90-day tariff moratorium.

Thursday, USDA will issue its latest rounds of weekly sales and exports, but we are not getting our hopes up. Although U.S. sales are running at decent pace, how much more dynamic would they be if China were in the mix as a net buyer? They soon should be.

It is thought current state reserves stocks in China are under 13 million bales. That number is way below the 60 million-bale buildup in the spring of 2014. China whittled down her stocks thorough a series of aggressive public auctions. Most likely it was primed to initiate new buying of U.S. cotton, when the trade tariff hit the market in June of this year. It is not known what level of supply China is aiming for, but we have read 11 million bales, give or take, is the least level she desires. Of course, that means any sort of weather adversity will hugely impact prices in 2019.

March cotton settled at 79.97 cents, down 0.05 cent, July as 81.55 cents, off 0.17 cent and December 2019 finished at 77.73 cent, down 0.09 cent.

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