What started out as a potentially friendly session, cotton trade fizzled at the closing bell. Earlier in the day, hopes were running high that a trade deal could happen as quickly as this Friday. However, enthusiasm waned when other agricultural markets failed to rally. Also, this Friday commences the first delivery day for the March contract. That event could easily paint a picture of cotton’s demand, or the lack of it.
However, there remains some 23,000 contracts in the March open interest, which says there is still much liquidation to happen between now and Thursday’s close.
The technical trend of the market remains decidedly bearish. From its 96-cent high of last June, when the tariff war was first initiated, to its lowest tick of 69.80 cents posted just last week, the market has reeled some 27-cents lower. With that in mind, a ton of bearish fundamentals have been dialed into the trade. That means if any reasonable agreement does come out of the trade talks and/or some new weather event befalls the planting of the 2019 crop, a decent rally can occur into the spring.
As a reminder, weekly sales and exports will be happen this Friday. However, this will be an unusual report as USDA will release all of its delayed data from January 10 to February 14 as a result of the government shutdown.
May cotton settled Tuesday at 72.19 cents, up 0.33 cent, July was at 73.48 cents, up 0.24 cent and December was 72.87 cents up 0.07 cent. Tuesday’s estimated volume was 55,100 contracts traded.