DTN Cotton Open: Rebounds on Oversold Conditions

Photo: Kay Ledbetter, Texas AgriLife Extension

The cotton market is slightly higher with a version of Turnaround Tuesday playing out. That is, from last Friday’s session to Sunday night’s trade, the market rallied sharply higher on news of a partial trade deal. Yet, when China backed off, indicating she wanted more face-to-face talks, the table turned on the market, and down it came.

In fact, Monday’s range spanned from a high of 65.85 cents down to a 62.19 cents low. Prices are slowly lifting their heads Tuesday.

USDA will publish its crop harvest data Tuesday afternoon due to Columbus Day. Last week, the 2019 crop was 25% harvested, which was mathematically the normal pace of gathering.

Because of Columbus Day, USDA’s weekly sales and exports are delayed until Friday. Last week saw better sales, but the future twist the trade is hoping to see from China is no more cancellations of her previous purchases. Such could signal a good faith effort towards resolving the U.S.-China trade dispute.

There was a sizable jump in open interest in recent sessions which may been seen as positive turn. However, fundamentally, traders know the 7.0 million bale carryout represents a 12-year high, and accordingly, the desire to rally may be weighed down until the long-suffering U.S.-China trade war is resolved.

The most recent Commitments of Traders data has speculators net short 19,300 contracts. This position is a far cry from their 49,000 net short position of mid-summer. Last week the data suggested speculators “retired” some 5,500 contracts.

Support for December cotton lies at 61.25 cents and 60.10 cents, with resistance at 64.20 cents. Overnight estimated volume stands at 9,605 contracts.

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