The cotton market finished lower Wednesday as it struggles with its dilemma of having a bearish chart trend versus the potential for a trade deal with China. Spot July remains doggedly bearish and is running out of time. Its options expire June 14 and it enters its delivery on June 24. Despite a decent export-sales pace, the fact China has been noticeably absent in the cash market is a big worry.
Additionally, it could cancel what is left of its remaining old crop purchases, somewhere about 850,000 bales. Although there is some emerging trouble in the U.S. Delta, the new crop is facing the prospect for more 2019 acres. However, waiting in the wings is the hope for a U.S.-China deal can still happen this year. To that end, the two presidents will face off at the G-20 meeting in Japan next month. If a deal can get wrangled, there is time a-plenty for new crop to rally.
There are heighten concerns among traders that the longer a trade resolution takes, the more market share the U.S. will lose to Brazil. While that is a plausible notion and is one that is somewhat happening, it’s not that simple. Brazil will hard-pressed to build the necessary infrastructure given its cheap currency to be an equal competitor with the U.S., at least for now!
It is worth noting a major Memphis analytical firm has upped its estimate of the 2019 crop to 14.10 million acres, from the generally held estimate of 13.78 million. Of course, the aforementioned weather concerns of the Delta could pare that final number.
For Wednesday, July cotton settled at 66.35 cents, down 0.41 cent, December closed at 66.89 cents, down 0.10 cent and March was at 67.82 cents, minus 0.26 cent. Estimated volume was 34,721 contracts.