DTN Cotton Open: Treads Sideways, Awaits Exports-Sales

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The cotton market was slightly lower overnight, weakened by deliveries against spot May, plus a lack of new bullish news. Even in the face of nearly record-high stock market closings, cotton futures struggled Tuesday.

There were 114 notices delivered, all issued by SG Americas. Most were stopped by Term Commodities, and the balance was spread out to three other trade houses. Some analysts opine if demand for cotton is that strong, then perhaps there should not have been any deliveries. Yet, that is an oversimplification with Wednesday’s total only involving 11,400 bales.

Thursday’s weekly sales and exports will carry a more dynamic impact. As the old-crop market winds its way through the calendar, and if exports-sales remain stout, then the July contract may experience a last minute bullish jolt. Right now, current crop year sales are running slightly ahead of USDA’s five-year average for this time of year. Naturally, what is needed is a trade resolution to the U.S./China trade war.

Reportedly, China will began auctioning off 1 million metric tons from state reserves as part of an overall plan to purge old bales from inventory. We understand some 10,000 metric tons (mt) will be offered daily from May 5 to Sept. 30.

Still, China imported some 150,000 mt of cotton during the month of March. That amount pushed year-to-date levels to 660,000 mt, up 935 from last season’s pace. Clearly, the demand is there.

For Wednesday, support for July cotton is 76.80 cents and 75.95 cents, with resistance at 78.77 cents and 79.20 cents. Overnight volume looks to be 5,042 contracts.

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