The cotton market is trading both sides of unchanged as the weekend China news is both bullish and bearish. To the bullish side, China’s manufacturing numbers exceeded all expectations. Ordinarily, any number under the 50% level suggests the Chinese economy is contracting, while any number greater than 50% is taken as the economy is expanding.
Monday’s number was 51.5%. The bearish news relates to Chinese retaliation of the so-called Hong Kong rights bill. The legislation was passed by the U.S. congress, signed by President Trump and supports the pro-democracy movement in that semi-autonomous province.
To that end, China has banned all U.S. military personal from port-of-call visits to Hong Kong, and has demanded all tariffs be lifted before any trade deal can be finalized. The cotton market can burn whichever side of the trade candle it chooses.
In other news, there were ten deliveries issued before the soon-expiring December contract. To date, all notices have originated with Term Commodities, reportedly the trading arm of a major Tennessee shipper, but all have been stopped by SG Americas, representing another strong commercial. December cotton expires this Friday.
Brazil’s Cotton Board is forecasting their crop to be 9% higher from last year. With currency, the Brazilian Real (pronounced (ree-all), at all-time lows, no doubt they will be a tough competitor with the U.S. Currently, China is just now beginning to buy cotton from their farmers for domestic storage. It has been reported China plans to acquire some 500,000 tonnes across the December-to-March time period to replenish strategic reserves.
Monday afternoon, USDA will issue crop progress data. Last week the pace of the 2019 harvest had reached 78% done. Today’s number should be just shy of 85% harvested.
Support for March cotton is 64.75 cents and 63.70 cents, with resistance at 66.15 cents and 66.90 cents. Overnight estimated volume is 5,295 contracts.