DTN Cotton Close: Higher in Muted Trade

Photo: Nick McMichen

After Friday’s strong upward surge, December cotton saw little follow-through Monday. In addition, to its narrow 0.88 cent range, Monday’s volume was light as well, as the trading action barely exceeded the 20,000 contract barrier.

Monday afternoon, USDA will rate the crop in its weekly condition report. Of late, the crop has been improving from week to week, to the point that last Monday’s data had the crop at 56% good to excellent. However, expectations for Monday’s release is for something less.

Technically, the trend of the market is demonstratively bearish. As it stands the December market is down nearly 3 cents for the month of July, and off over 10 cents for all of 2019. These steep declines have speculators positioned not only short, but record net-short, according to the latest CFTC reportable data.

Of course, a huge reason is the U.S.-Chinese trade war. As of now, those negotiations are in “unofficial suspension.” as the two sides are working towards having face-to-face meetings late next week. However, China is initially demanding all trade tariffs be lifted before any serious sit down can occur. On the other side, the U.S. is threatening to impose an additional $350 billion of new sanctions on Chinese imports.

After Monday’s crop condition data, the only other cotton-specific report will be this Thursday’s weekly sales and exports. As the 2018-19 season winds down to a close, it will be interesting to see how the transition between old-crop and new-crop does happen.

For Monday, December cotton settled at 63.36 cents, up 0.29 cent, March closed at 64.15 cents, up 0.17 cent, and December 65.67 cents, down 0.06 cent. Monday’s estimated volume was 20,850 contracts.

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