DTN Cotton Open: Market Weakness Returns

Cotton modules lined up in a gin yard. ©Debra L Ferguson

After plunging on Monday, then somewhat parring those losses, the cotton market is back to trading weak again Tuesday morning. Traders and hedgers are positioning themselves for spot December’s delivery come Friday, November 22. As a simple reminder, producers must exit the market no later than this Thursday’s close, November 21.

The current open interest total for spot December is 28,045 contracts. That means there are 28,045 longs, and 28,045 shorts, and in time, the twain must come to zero. Anxiety and volatility may dog the market this week.

Post-close Monday, USDA reported the 2019 harvest is 68% gathered. This pace compares to last week’s 62% complete, last year’s 58%, and the five-year average of 66% gathered.

As the harvest moves towards 75% done, the emphasis of the producer will greatly change from gathering cotton to hauling and ginning cotton. That shift ought to cause the final spill in price towards Thanksgiving.

The U.S.-China trade talks remain at an impasse. China may sign a deal if the tariffs first rolled back, but the U.S. stance is to sign a deal, and then roll back tariffs. If nothing happens, a new set of U.S. tariffs are set to go into effect on December 15.

Analysts are thinking President Trump will appear weak in the eyes of the Chinese if he blinks on implementing those sanctions. Yet, the Chinese are watching the impeachment proceedings with keen interest, as they see a politically weakened, or better still removed, President Trump will financially favor them.

For today, support for March cotton stands at 65.00 cents and 64.80 cents, with resistance at 66.90 cents and 67.20 cents. Overnight estimated volume is 9,290 contracts.

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