After riding the emotional rollercoaster of the U.S./China trade ordeal, the cotton market is moderately weaker Friday morning. There has been no U.S. acceptance of China’s latest offer to reciprocally reduce tariffs over time. Additionally, the market is prepping itself for USDA’s crop report at 11 a.m. CST, and ICE Cotton’s option expiry for the December market.
Since demand is key to the cotton market, traders will focus on the exports category of Friday’s supply-demand report. Current guesses have domestic exports slightly slipping to 16.25 million bales, down from last month’s 16.50 million bales. Even such a small decline could swell carryout higher, which already stands at a 12-year high. Two years ago stocks were 2.75 million bales.
Thursday’s net total weekly sales were an impressive 283,500 bales, with China in for 25,500 bales. Thus, cumulative sales for cotton stand at 62% of USDA’s forecast for the 2019/2020 season. This number compared to the five-year average of 54%.
With Friday’s option expiration, traders have until 5:00 p.m. to exercise whatever puts and calls they hold. As with nearly every option expiration period, there will be changes to the total open interest standing next week.
For Friday, support for December Cotton lies at 63.30 cents and 62.00 cents, with resistance at 64.85 cents and 60.00 cents. Overnight estimated volume is 15,255.