DTN Cotton Close: Unable to Hold Early Gains

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After zooming well over 1.00 cent higher in early morning enthusiasm, unfortunately, the cotton market pared much of its gains by its close. Despite all the hype and hoopla over renewed U.S./China trade talks, the thing the market needs to see is a signed agreement with China, immediately followed with buy orders for U.S. cotton.

Yet, another important nuance for the market is the current U.S. government shutdown. To that end, the market information side of USDA is financially idled. Thus, there has been zero marketing news for cotton to trade upon. As a result, this week’s January Supply and Demand report, originally scheduled for the Jan. 11 has been canceled.

It is interesting to know many of the furloughed government workers were paid just prior to Christmas, but in the next few days some 800,000 federal workers will not receive a paycheck.

The current bullish driver of the market is its oversold technical condition. Being oversold means the market fell too fast, too far with no brief recovery rallies. Indeed, from Dec. 3 to Jan. 3, spot cotton fell well over 11.00 cents, and is just now, attempting a small upside correction. However, volume was light.

The estimated volume for Monday was 18,600 contracts traded. No question the next major amendment event for the market is to see whether definite progress is made this week between U.S. and Chinese negotiators.

March cotton settle 72.75 cents, up 0.23 cent, July was 75.40 cents, up 0.11 cent, and December was 74.09 cents up 0.25 cent. It is interesting to note December 2019 cotton is trading higher than the nearby spot March contract.

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