The cotton market was severely punished Thursday, caused by net-negative sales and liquidation of the July on-call interest. Earlier in the session, USDA reported net-negative sales of 119,000 bales against the Old Crop season. Turkey and China were huge cancelers of previously purchased cotton. Next, all producers with cotton on-call must flatten those holdings by Friday’s close. Thus, with such poor fundamentals, and virtually no time left, lower was the path of least resistance.
No doubt, July cotton’s unwinding is putting peripheral pressure on new crop December. It traded down as low as 65.61 cents, below its low of last Friday, June 14. Yet, to a large extent, the December Contract is operating with a different set of fundamentals. On Monday, June 24, USDA will issue another crop progress/condition report, but on Friday, the 28, the government will release its all-important planted acres data. Also, that date corresponds closely with the G-20 meeting, when Presidents Trump and Xi will meet to hopefully restart the trade talks.
Technically, the trend of cotton remains steeply lower, with speculators net short the market. Until the fundamental dynamics of the market alter, which, in turn, will change the flow of the technical indicators, there is little incentive for them to exit.
For Thursday, July cotton settled at 63.21 cents, down 2.17 cents, December was at 65.96 cents, off 1.20 cents and March was at 66.76 cents, minus 0.73 cent. Estimated volume was 35,200 contracts.