The cotton market is moderately higher Monday after last week’s melt of the July Contract. During that time, the market was struggling with a hefty on-call cash cotton position, in which producers had just a few days ahead on Monday’s delivery to square their positions. The result was a massive weekly decline well over 6 cents for spot July. Monday morning, there was only one notice delivered. The delivery period runs through July 8.
Although December cotton suffered peripheral chart damage, it has its own set of fundamentals to face. Those come in the form of Monday afternoon’s weekly crop progress/condition data, Thursday’s sales and exports, and Friday’s planted acres report from USDA.
However, perhaps the most dynamic event will be when Presidents Trump and Xi meet to discuss trade. Supposedly, the two leaders will meet Thursday night at the G-20 in Japan. Obviously, the results of that meeting, or the lack of them, will set the tone for the cotton market for months, if not years, to come.
Old crop sales hit a marketing year low last week, but so far, demand for the new crop has been decent. Although a trade deal with China would improve current demand, in all likelihood a crop scare is need to raise cotton off its current lows.
To that end, we continue to hear of slack monsoons for India, a wide-spread infestation of fall armyworm in China, and a major locust swarm is threatening some two million acres of Pakistani cotton. So, trouble may now just be unfolding.
As of June 18, the commitment of trader’s data showed managed money speculators remain stoutly net short.
For Monday, support for December cotton stands at 65.47 cents and 64.70 cents, with resistance at 66.30 cents and 67.00 cents. Overnight estimated volume is 3,067 contracts.