DTN Cotton Open: Up On Oversold Market

After cascading some 200 points down this week, the cotton market is witnessing some position squaring ahead of the weekend. With the month of October less than two weeks away, the market is really turning its attention to the upcoming U.S.-China trade talks.

To that end, there are lower level talks happening in Washington Friday as deputy negotiators are laying the groundwork for the bigger talks for next month. Their agenda includes currency manipulation, Fentanyl, and U.S. agriculture. In fact, we understand a separate Chinese delegation is heading to Nebraska to discuss trade with local farmers.

The cotton market continues to suffer from large supplies and waning demand. Despite USDA’s cut of 500,000 bales to the 2019 U.S. crop, it remains at nearly 22 million bales. That represents the largest crop in 14 years. Additionally, China continues to be a massive canceler of previous cotton purchases. Last week, China cancelled 20,000 bales, and Thursday canned another 39,000 bales.

The growing fear among traders is other countries may follow suit and negate their earlier, higher priced purchases. Therefore, it is somewhat deceptive when we read that cumulative sales as of September 12 are at 54.7% of the government’s marketing year target, versus the 5-year average of 46.3%

USDA will issue another crop condition and harvest report on Monday. So far, the weather has been conducive to harvest, but more serious gathering efforts occur across the Oct-Nov-Dec harvesting window.

For Friday, support for December cotton will be 60.25 cents and 59.55 cents, with resistance at 61.35 cents and 63.40 cents. Overnight estimated volume stands at 3,903 contracts.

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