DTN Cotton Open: Higher, Ping Pongs with China

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

Despite doubting comments from both sides about securing a trade deal, it now seems both sides are indeed edging closer. Reportedly, negotiators are wrangling over how to lift current trade sanctions and delay new ones set for December 15, while meeting certain conditions for a Phase One agreement. A major condition for that initial agreement with China is an absolute and verifiable commitment to purchase U.S. agriculture.

Mid-week the tone for a deal has turned positive, although it’s hard to think the world’s two largest economies can come to terms before December 15. The U.S. House of Representatives passed a bill late Tuesday requiring U.S. punishment of Chinese officials involved in the repression of Uighur Muslims in the country. China quickly vowed retaliation.

Currently, China is buying cotton from their own farmers as a way to restock strategic reserves and to stabilize the domestic cash market. Still, in addition to Vietnam, China has been quiet but noted buyer of U.S. cotton this season.

Spot December cotton remains in delivery. Today, there were a mere four notices issued by Term Commodities. All were stopped by SG Americas. To date, some 810 notices have been tendered. December cotton fades off the ICE Board this Friday.

As a reminder, weekly sales and exports are scheduled Thursday at 8:30 a.m. Last week’s numbers showed old crop sales of 281,500 bales, with China a buyer of 39,000. Next Tuesday, USDA will issue its monthly supply-demand data. Last month the government lowered the U.S. crop some 900,000 bales, which in turn cut ending stocks down to 6.10 million, a ten-year high.

For Wednesday, support for March cotton lies at 64.00 cents and 63.70 cents, with resistance at 66.15 cents and 66.90 cents. Overnight estimated volume is 5,325 contracts.

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