DTN Cotton Open: Lower On Nervous Trade

Cotton modules in front of cotton gin. ©Debra L Ferguson

Cotton is down Wednesday, as many participants are prepping for a “sell the news” event after the phase one deal is signed.

Wednesday at 11:30 a.m. EST, at the White House, the phase one agreement is set to be signed. In this deal China pledges to buy some to buy $200 billion worth of U.S. goods over the next two years. Specifics as to what amounts of what products have yet to be published.

To that end, there are concerns across global markets over the viability of the deal, as supposedly the U.S. will not automatically lift its trade sanctions on China until later this year, perhaps even after the 2020 election.

This hesitation has put some mild pressure on global stocks and commodities markets. Still, we understand this stance is not a new twist to the Chinese. The partial trade deal is expected to boost global economic growth in 2020, and foment a phase two negotiation. Yet, the common attitude among many traders is not to expect too much of a softening of the many trade and political differences between the U.S. and China.

Cotton is down Wednesday, as many participants are prepping for a “sell the news” event. That is, after a nearly 800-point vertical up-move from the Dec. 3 low, the market has become very overbought. Thus a “shaking of the trees” might be in order. Still, in the grand scheme, having a signed trade deal is better than no deal at all.

Yet, it’s not all clear sailing. Last Friday’s supply-demand numbers from USDA point to ample supplies for the 2019/2020 season. However, there are expectations U.S. acres for 2020 will be down some 10% below last year. Thus, if Mother Nature were to play another upending spring-time role, the 2020/2021 crop could get off to a rough start.

For Wednesday, support for March cotton is 70.35 cents and 69.10 cents, with resistance at 72.00 and 72.50 cents. Overnight estimated volume reflects 7,345 contracts traded.

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