DTN Cotton Open: Market Ignores So-So USDA Data

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

    The cotton market sloughed off so-so crop data Friday to keep its bullish focus squarely on Wednesday’s U.S.-China signing ceremony. After months and months of tedious negotiations, both China and the U.S. are expected to sign the Phase One trade deal. Afterwards, a Phase Two negotiation is expected to begin.

    Referencing USDA’s crop report, the 2019 crop was lowered a mere 110,000 bales, from 20.21 to 20.10 million bales. Although the government did lower harvest acres 12.51 to 11.80 million, it increased yields from 775 to 817 pounds per acre. Additionally, despite strong sales and export business thus far in the 2019/2020 season, the government left exports unchanged. The bottom line for the world number was a small 700,000-bale reduction in global carryout.

    Sales have reached 76% of USDA’s original forecast for the 2019-2020 season compared to 5-year average of 70%. The latest commitment-of-trade data has speculators remaining with their net long position. Their current estimated position stands at 20,880 contracts net long.

    Technically, the market has become very overbought, meaning prices have moved too high, too fast without a serious correction. In fact, there are some in the ranks suggesting Wednesday’s Phase One ceremony may turn out to be a buy-the-rumor-sell-the-fact event. Still, the trend is up, and China is expected to begin to ramp up its buying of U.S. cotton.

    For Monday, support for March cotton stands at 70.70 cents and 70.10 cents, with resistance at 72.00 cents and 72.50 cents. Overnight estimated volume is 8,602 contracts traded.

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