DTN Cotton Open: Higher on Weather, Oversold

Cotton seedlings. ©Debra L Ferguson Stock Photography

Ahead of the 3-day Memorial Day weekend, the cotton market is trading higher. Short-sold speculators are electing to book some profits as, for the moment, the market has halted its sharp decline and there are heightening concerns the 2019 crop is beginning to suffer some weather stresses.

To the latter point, Georgia, the nation’s number two cotton producer, is currently suffering from horrific triple-digit temperatures with literally no rain in sight. Still, as the speculators see it, with the market’s 1,200-point loss during the month of May, they feel it is prudent to lighten their bearish load.

In a major announcement Thursday, President Donald Trump authorized some $16 billion for tariff aid for U.S. agriculture. The amount is to compensate producers who suffered, and are suffering, losses due to the Chinese trade war. Additionally, the government is scheduled to pass a final disaster bill Friday, providing relief for those areas of the country affected by the various natural disasters of last year.

As of May 16, cumulative cotton sales for 2018/2019 stand at 106% of their 5-year average of 101%. However, new-crop sales (2019/2020) are lagging at 18% from last year’s pace. Thus far, export commitments have reached a level of 3.50 million bales.

Generally, speaking the southeast and the Delta look to be dry next week, while Texas is expecting more rainfall.

Cotton futures trade will close Monday in observance of the Memorial Day holiday. Thus, USDA will issue its planting progress numbers on Tuesday and its weekly sales and export data Friday.

For Friday, close-in support for December cotton stands at 65.85 and 65.25, with resistance at 67.65 and 67.80. Overnight estimated volume is 5,311 contracts.

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