DTN Cotton Open: Sees Follow-Through Selling

Cotton fields ready for harvest. ©Debra L Ferguson

The cotton market is experiencing post-ceremony blues Thursday morning. After signing the momentous Phase One trade deal between the world’s two greatest economies, traders and investors continue to seek clarity as to the real terms of the agreement. Additionally, with the three-day MLK Day weekend ahead, other traders are electing to book profits.

Thus, reaction of the cotton market, as well as other markets, in the face of such a bullish development was a classic buy-the-rumor-sell-the-fact event. Still, many traders expect the market to eventually gather itself and attempt another upside push.

USDA issued its weekly sales and exports data Thursday morning. Collectively, the numbers were an improvement over last week’s data. A summary of the government report reveals “net sales of 232,900 RB for 2019/2020 were up 53 percent from the previous week and 19 percent from the prior 4-week average.”

Increases primarily for Vietnam (71,600 RB), Pakistan (34,800 RB), Turkey (29,500 RB), Taiwan (27,500 RB), and Bangladesh (25,000 RB), were offset by reductions for Malaysia (6,200 RB) and Japan (1,400 RB). For 2020/2021, net sales of 14,500 RB were for Honduras (10,100 RB) and Vietnam (4,400 RB).

Exports of 301,700 RB were up 43 percent from the previous week and 42 percent from the prior 4-week average. Exports were primarily to Vietnam (86,800 RB), Pakistan (47,100 RB), Turkey (39,100 RB), China (24,700 RB), and Indonesia (19,800 RB).

Net sales of Pima totaling 34,300 RB, a marketing-year high, were up noticeably from the previous week and from the prior 4-week average. Increases primarily for China (13,200 RB), India (8,000 RB), Vietnam (6,400 RB), Pakistan (4,200 RB), and Turkey (1,500 RB), were offset by reductions for Japan (100 RB).

Exports of 7,700 RB were up 42 percent from the previous week, but down 3 percent from the prior 4-week average. The primary destinations were Pakistan (2,300 RB), India (1,100 RB), Vietnam (900 RB), El Salvador (900 RB), and Bangladesh (800 RB).”

With the MLK holiday on Monday, the next export sales report will be delayed until Friday. If the market continues to see 250,000 bales sold on average each passing week, USDA may be forced into lifting its exports category on the February supply-demand report.

Going forward, the cotton market will go about the task of processing and consolidating its thoughts about the definitive meaning of the Phase One agreement.

For Thursday, support for March cotton stacks at 69.50 cents and 68.75 cents, with resistance at 70.40 cents and 70.95 cents. Overnight estimated volume stands at 10,200 contracts.

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