The cotton market finished higher Wednesday despite a falling Dow Jones Industrial Average, and bearish supply-demand data. However, the focus of the market Wednesday was the hot and dry conditions that are gripping much of the Cotton Belt. Moreover, recent weather forecasts carry small prospects for any significant rainfall. This Monday’s crop condition will set the tone for general trading towards the end of the month of August.
However, on the other side of the world, India’s monsoonal activity has dramatically improved. In fact, India has received above average monsoon rains for a third consecutive week. Although India supposedly planted 10% less hectares in 2019 than the 2018 crop, USDA still hiked production some 500,000 on its July Crop report, taking production to a 29-million-bale crop.
Thursday, USDA will issue weekly sales and exports. The market definitely needs to see strong activity. Last week sales for the 2019-20 season was 179,000 bales and China was a standout buyer. However, some 7.5 million bales were rolled for the 2018-19 season into the new-crop season
Something of a “new negative” is beginning to emerge for the general marketplace, and that is the possibility of a recession. For the first time since 2007, yields on 10-year notes have moved above yields on 20-year bonds. Typically, when short-term rates spike above the long-term rates, the general interpretation is a recession is on the horizon within six to 12 months.
For Wednesday, December cotton closed at 59.57 cents, up 16 cents, March was 60.24 cents, up 19 cents, and December 2020 settled at 63.11 cents, down 13 cents. Wednesday’s estimated volume was 19,185 contracts.