DTN Cotton Close: Market Higher, Awaits Exports, Trade Talks

Photo by Justin Ballew, Clemson University

The cotton market settled higher Wednesday amid expectations for Thursday’s weekly sales and exports data, and bigger still, the possibility of resumption of the U.S.-China trade talks. Last week, exports-sales showed lower sales, but stronger shipments. Interestingly, both Mexico and China were net cancelers, which we assume was more of a political poke than a true cotton decision.

Next week, the G-20 meeting meets in Japan for two days, June 27 and 28. Given the presidential tweet this week, the market has high hopes for the U.S.-China trade talks will resume and eventually lead to a trade deal. Supposedly, as of now, top negotiators from both camps are meeting to work out some of the preliminary details before the two presidents meet.

The Federal Reserve left interest rates unchanged. This was pretty much expected. Immediately following the 2 p.m. announcement, the U.S. dollar sharply declined.

As of the last planting progress number only 11% of the nation’s cotton crop lacks planting. We would think that effort will be basically completed by this weekend. Afterwards, the emphasis will be on yield, and there the rubber-will-meet-the-road. We continue to hear of unfolding production troubles in India, China and Texas. However, in addition to Texas, the Delta nor is the Southeast pristine perfect with their cotton stands.

Although cotton’s charts reveal a steeply bearish downtrend, the market is begging to mitigate that bearishness. Our proprietary method of measuring the “attitude of the trend” does have it slightly improving. The speculative community remains decisively short, which would make them vulnerable to some sort short-covering event, if they see a technical and/or fundamental reasons to escape. They may witness such reasons as early as next week.

For Wednesday, July cotton closed at 65.38 cents, up 0.06 cent, December ended at 67.16 cents, up 0.34 cent and March finished at 67.49 cents, up 0.30 cent. Estimated volume was 29,700 contracts.

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