DTN Cotton Open: Retreats on Technicals, China

Photo by MSU Extension Service/Kevin Hudson

The cotton market is sharply lower overnight, as China released additional negative economic news. In short, Chinese industrial output fell to a seventeen-year low, underscoring just how weak the Chinese economy is becoming. We suspect that news was the fundamental driver for cotton’s overnight decline.

Additionally, there may have been some technical selling which limited the market’s gains as well. Wednesday, the market came within a frog’s hair of hurdling its January high. Doing so would have the market posting a new high for the year. Yet, prices stumbled and bullish longs quickly lapped up their profits.

USDA issued its latest weekly sales and export data today. Net sales for the 2018/2019 season were 166,100 bales. Interestingly, China lead the pack of buyers with 49,300 bales, followed by Turkey (25,400), Indonesia (20,800), Vietnam (14,000), and Bangladesh (11,000). For 2019/2020, net sales were 23,100 bales, split between China (19,000) and Thailand (2,600).

Weekly shipments totaled 287,000 bales. The main destinations were Vietnam (78,700), Pakistan (52,700), China (23,900), Turkey (22,800), and Mexico (21,100). Net sales of Pima totaling 29,300 RB for 2018/2019 were primarily for China (13,400), Turkey (5,000), Vietnam (4,400), Peru (2,600), and India (2,100).

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For 2019/2020, total net sales of 1,600 RB were reported for India. Exports of 13,000 RB were primarily to India (5,700 RB), Vietnam (3,600 RB), Peru (1,700 RB), and Pakistan (1,400 RB).

In the grander scheme, the market is hopeful for a China trade deal. However, comments from several key US officials seem to be preparing the markets for disappointing walk away. The President’s top negotiators are suggesting they are close to a deal, and yet a deal remains yet miles apart.

For today, May cotton support is 74.00 cents and 73.10 cents, while resistance ought to surfaces at 76.15 cents and 77.05 cents. Overnight estimated volume stands at 9,610 contrasts.

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