DTN Cotton Open: Higher on China Hopes, Chart Technicals

Photo: Kay Ledbetter, Texas AgriLife Extension

The cotton market continues to build a bullish case as the background noise for a U.S.-China trade agreement is becoming louder. The two sides are expected to meet in November in Chile at the Asia-Pacific Economic Conference to potentially sign a portion of the trade deal.

Currently, deputy-level talks are occurring, laying the groundwork for an eventual all-encompassing agreement as it relates to forced technology transference, currency manipulation, and technology theft.

As of October 20, the 2019 crop is 40% harvested. This number compares to last week’s pace of 32% gathered, and the five-year average of 35%. The Texas harvest is 32% done, up 5 points. Georgia is 48% complete, and Mississippi is 63% done. The condition of the nation’s crop is rated at 41% good/excellent versus last week’s 38% good/excellent, and last year’s 34% good/excellent.

As of October 10, cumulative sales for the 2019/2020 season reached nearly 60% of USDA’s projected seasonal target. The five-year average stands at 51%. Current sales are maintaining a strong pace despite the fact there is no trade deal with China.

The technical trend cotton began to improve once the December contract hurdled its September high. Since that time, the market has turned even higher. To that end, speculators have been paring down their short-sold position from a midsummer record high of 49,000 plus contracts, to their most recent reported level of 11,300 contracts.

For Tuesday, support for December cotton is 63.45 cents and 62.70 cents, with 65.85 cents and 67.10 cents as overhead resistance. Overnight estimated volume is 8,880 contracts.

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