DTN Cotton Close: China Hopes, Good Sales, Keep Rally Alive

December cotton closed up $0.17 on Friday, ending the week with the fourth consecutive higher daily close at 65.16 cents per pound. Friday’s close is close to the highest finish since July.

Helping the push to higher levels — which has seen December now rally more than 8 1/2 cents from the contract low set on August 26 — was some good news in the form of solid export sales, and there appears to be more optimism that a U.S.-China trade deal may be closer to becoming final. The weakening U.S. dollar index has also helped export prospects.

Export sales for the week ending October 13 were 205,600 bales for 2019-20, and that is up 9% over the previous week, and 36% above the four-week average. Vietnam was the largest buyer, at 108,800 bales, and Vietnam accounted for the largest export shipments of 35,700. This is no surprise as Vietnam typically takes 54% of their imports from the U.S., which amounts to roughly 7.3 million bales.

As U.S. and China trade representatives continue to work on the written version of “Phase one” of the verbally agreed to trade deal, the objective is to have the agreement signed by Presidents Xi Jinping and Trump at the APEC meeting in Chile on November 16.

One of the agricultural products that China has agreed to buy more of from the U.S. is cotton, along with soybeans and pork. China’s slowest growth in third quarter GDP in 27 years, along with rampant food inflation could force them to settle the trade deal much quicker.

Weather for cotton features a mostly dry pattern in Texas for the next seven days and above, but in the Southeast a tropical storm is expected to bring rains, with some heavy, to Georgia, Alabama and Virginia, likely slowing harvest efforts.

Cotton harvest as of Monday was 32% complete, versus a 27% average and 25% last year. Texas was 27% done, while Georgia and Alabama were at 40% and 54% done — well above average. Cotton conditions fell by 1 percentage point to 38% good to excellent, with a poor/very poor reading of 21%.

Dow Jones reported the Cotlook ‘A’ Index was up 1 cent Friday at 75 cents per pound. The adjusted world price (AWP) rose to 55.26 cents per pound, which is the highest level since August 2.

Friday’s closing price on December 2019 cotton futures of 65.16 cents per pound is up nearly 3 cents per pound on the week. December 2020 closed at 66.88 cents per pound, and that has rallied 5.60 cents since the low on September 3. For December 2019 there is solid resistance just above at 66 to 67 cents.

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