The market is higher Monday morning in sympathy with the surging Chicago grains and waning field conditions across the cotton belt. Grains are up as heavy weekend rains will further delay the planting of the 2019 crop, but for cotton, the yield of the 2019 crop is under close scrutiny as weather conditions across the nation have been less than pristine. Moreover, we now hear India’s monsoons are lagging.
Monday afternoon, USDA will report on the planting progress and condition of the 2019 crop. Last week’s crop planting efforts were at 75% complete, and the condition was 44% good to excellent. Although, the Southeast has experienced some much needed rainfall, in some areas the help may not be enough to fully correct the crop.
As of June 6, cumulative exports dales for the new-crop season stand at 23.7% versus USDA’s seasonal forecast. The five-year average for such sales for this time of year is 19.6% .The market still has high hopes a trade deal with China will emerge this year. However, the initial step that needs to happen is an agreement to renew the trade negotiations at the G-20 summit on June 27-28. Supposedly, Presidents Trump and Xi will meet in Japan at that meeting.
Spot July options expired last Friday, and so open interest will likely change, that is, get smaller. This Friday is the last day for on-call cotton to be fixed, as July futures go into delivery a week from Monday, June 24.
Trend-following funds, currently heavily short the market, spent last week as strong buyers. However, it will require very dynamic, upside bullish action to move them from a net-short position to a neutral, or possibly a net-long stance. Of course, anything is possible.
For Monday, support for December cotton is 64.95 cents, with resistance at 68.60 cents and 69.70 cents as resistance. Overnight estimated volume is 10,800 contracts.