Cotton market dramatically dropped Monday as the market was prepping for the December contract’s delivery period this Friday. Anyone wishing to avoid the delivery process must exit by Thursday’s close. Thus, producers are having to decide whether to fix or roll their positions forward, temporarily buying time.
Another negative for Monday’s session are the stalled U.S.-China trade talks. Despite the constant flow of positive headlines, the market may be suffering from “trade talk fatigue”. As of now, there is no official time and place for the U.S. and Chinese negotiators to meet and sign a deal.
There are deputy-level teleconferences happening, but no tangible agreement has been set. Perhaps, the Chinese are eyeing the impeachment hearing to see if Mr. Trump will be politically wounded or even removed. Monday afternoon USDA will report on harvest progress, which should soon will surpass 70% gathered.
Certainly, the urgency of the producer has changed from picking cotton, to getting it quickly ginned. Thus the flow of actual cotton may soon choke the cash pipeline affecting flat price, as well as basis.
Monday, December cotton settled at 64.21 cents, down 0.65 cent, March was 65.97 cents, down 0.72 cent and December 2020 ended at 68.26 cents, down 0.55 cent. Monday’s estimated volume was 37,385 contacts.