DTN Cotton Close: Breaks Lower on Poor Sales

Texas cotton field ready for harvest. Photo: Justin Chopelas

The cotton market continues in its downward retreat amid uninspiring sale and exports data. Thursday’s data showed current sales for 2019-20 at 85,000 bales. This compared to last week’s activity of 74,000 bales. In addition, last week saw China cancel 20,000 bales, while this week, it cancelled 39,000 bales. Apparently, even if the U.S. and China are heading for a trade deal next month, China’s business behavior certainly does not reflect it.

Despite last Thursday’s rally, the market could not hold its gains, as selling emerged from both speculators and producers alike. Speculators were big underwriters of last week’s rally, as they rapidly bought back their short-sold positions, while producers initiation hedge-type selling once the December market cleared the 63.00-cent level.

However, with the U.S. 2019 harvest beginning in earnest next month, prices ought to feel the extra weight of increased selling pressure. Additionally, there is no guarantee of success of the U.S./China trade talks. Failure could result in a bearish one-two punch to the chin of the market.

December cotton will enter Friday’s trading session, already down 1.95 cents on the week. With next week being the last full week of trading for the third quarter, there might be additional fund liquidation.

For Thursday, December cotton settled at 60.33 cents, down 0.17 cent, March ended at 61.06 cents, off 0.16 cent and December 2020 concluded at 64.04 cents, down 0.18 cent. Thursday’s estimated volume was 19,494 contracts.

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