DTN Cotton Open: Mixed as Market Attempts Recovery

Moving cotton modules into line during harvest. ©Debra L Ferguson

After its unmerciful fall Wednesday, the cotton market is trying to gain some bullish footing. Wednesday saw the market collapse under the weight of long liquidation, driven by the December contract and fresh speculative short selling. Volume was a huge 50,000 plus contracts. Thursday is the last day for all December participants to exit the spot month. However, given that December Futures are greatly reduced, volatility should not be as high.

USDA reported good business last week, when one remembers last week was a marketing-year-high for sales. A summary of the report follows:

Net sales of 227,600 RB for 2019/2020 were down 34 percent from the previous week, but up 20 from the prior 4-week average. Increases primarily for Vietnam (95,600 RB), Pakistan (40,100 RB), Bangladesh (31,200 RB), Turkey (28,200 RB), and Japan (14,300 RB), were offset by reductions for China (24,200 RB).

For 2020/2021, net sales of 58,200 RB were primarily for China (39,600 RB), Guatemala (15,800 RB), and India (1,800 RB). Exports of 137,900 RB were up 9 percent from the previous week, but unchanged from the prior 4-week average. Exports were primarily to Pakistan (28,800 RB), Vietnam (27,300 RB), China (22,000 RB), Mexico (18,400 RB), and Bangladesh (9,600 RB).

Net sales of Pima totaling 7,100 RB were down 41 percent from the previous week and 60 percent from the prior 4-week average. Increases were primarily for Vietnam (2,200 RB), El Salvador (1,100 RB), Bangladesh (1,000 RB), Peru (800 RB), and Pakistan (600 RB). Exports of 5,900 RB were up 87 percent from the previous week, but down 13 percent from the prior 4-week average.

The primary destinations were India (2,900 RB), China (900 RB), El Salvador (900 RB), Peru (300 RB), and Bangladesh (300 RB).

Thursday morning, China invited U.S. negotiators to return to Beijing for additional trade talks. Of late, those talks have been at an impasse as both side dug in their heels. However, last Tuesday, President Trump indicated he would proceed with the December 15 tariffs if no trade deal were struck. Perhaps that was the motivation for the Chinese invitation.

For today close-in support for March cotton is 63.70 cents, with resistance at 65.00 cents. Overnight estimated volume is 12,405.

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