DTN Cotton Close: Higher on Chinese Sales

The cotton market was higher Thursday as the appearance of China in the weekly sales and exports data was a psychological help. Of course, its buying 60,000 bales was not a huge number, but it was the best we’ve seen in some time. Thus, ahead of the weekend, and being so demonstratively oversold, it did encourage the bearish speculators to take in some profits.

Friday, there may be additional position squaring ahead of Monday’s monthly supply/demand report. Expectations are for a stable or increased 2019 crop and/or a reduction of future exports. Last month USDA pegged the 2019 crop at 22 million bales. Anyway, the net effect could be a hike in domestic ending stocks number. Also, there is the potential that the world carryout may increase.

Last month saw global stocks shoot above the 80 million-bale mark, as India’s crop was surprisingly upped some 500,000 bales. Since that time, India’s monsoons have supposedly improved, thus global carry may again increase.

The managed-money speculators remain at record net short. However, their position may have since increased given the 600-point drop earlier this week. Still, a record net-short position is not an automatic buy signal. The technicals and fundamentals have to be such that the sentiment of the market changes enough to encourage huge short-covering.

Thursday, December cotton settled at 59.58 cents, up 0.75 cent, March finished at 60.42 cents, up 0.53 cent and December 2020 closed at 63.37 cents, up 0.19 cent. Estimated volume was 28,355 contracts.

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