The cotton market is higher Monday morning as it attempts to build upon the technical reversal of last Friday. Fueling the buying may be an element of the record-short speculators electing to reduce the level of their bearish positions. The most recent data from the CFTC indicates managed money traders sold an additional 2,200 contracts, which increased their short position to an extreme 44,000-plus net-short contracts.
Monday afternoon, USDA will report on the 2019 Crop’s condition. Last week, the government rated the high-end of the cotton crop at 56% good/excellent, but prevailing drier and hotter conditions of last week may have slowed the crop’s development. In fact, Texas has been suffering high heat and dryness. Currently, the 8-14 day weather models are showing additional hot and dry conditions all into early August.
As of July 11, cumulative export sales for the 2019/2020 stand at 27% of USDA’s projections versus the five-year average of 25% for this time of year. Of course, the imminent August supply-demand report (August 12) will likely alter those numbers. Additionally, the U.S. and China are struggling with any sort of progress on the trade war front. As that situation stands, talks may resume at the end of July, but initially China wants a total lift of all U.S. sanctions before serious progress can be made. On the flip side, the U.S. is prepping to add more tariffs on Chinese imported goods.
For today support for December cotton lies at 62.50 cents and 61.50 cents, with resistance at 64.70 cents and 65.80 cents. Overnight estimated volume is 6,751 contracts traded.