DTN Cotton Open: Overnight Market Chops Sideways

Cotton planting. ©Debra L Ferguson Stock Photography

The cotton market is picking up where it left off last week — bearish. Last week saw the market fall some 300 points, and the week before roughly about 750 points were lost. There was some thought the bullishly surging grains might lend a psychological helping hand to cotton, but that is not happening.

Cotton remains in the bearish grip of the U.S.-China trade war. Late last week, the Chinese seemed bent on widening the troubles. For starters, they were critical of Washington’s policy and indicated further talks would be useless. Thus, no new talks have been scheduled.

In fact, the next chance meeting will be at the G-20 meeting in Japan next month. There President Trump and President Xi could meet and rekindle the stalled negotiations.

Technically, the market is steeply oversold. Last Tuesday was a huge reversal day pattern for which some traders saw as an opportunity to rally, but recovery has been virtually non-existent. In fact, the market posted fresh lows into Friday’s close.

Monday afternoon, USDA will issue its latest crop progress data. To that end, weather adversities are just now beginning to take hold of the news. There has been too much rain in the U.S. Delta, while the Southeast is fast becoming hot and dry. Texas too has seen a variety of troubles with some locales flooding as well as being hit with episodes of hail.

With the old crop business in the short rows, sales and exports concerns have turned to the new crop. As it stands, new crop sales have reached some 3.08 million bales. This amount is down 25% of last year’s pace. Naturally, the obvious reason for the slower pace is the U.S.-China trade war.

Cotton positioning as of May 14 suggests managed money traders net sold some 19,000 contracts, putting the market net-short about 24,800 contracts. Earlier in the spring, they carried a net-long position.

For Monday, support for December cotton is 65.25 cents, with resistance at 67.55 cents and 68.20 cents. Overnight estimated volume stands at 7,505 contracts.

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