After a somewhat disappointing close Tuesday, the cotton market is a tad higher Wednesday. Although the market saw positive news from the NCC’s survey indicating fewer 2020 acres, and China’s willingness to lift some import barriers to U.S. agriculture, the cotton market still could not add two-plus-two to get a bull move Tuesday.
Friday will likely see some fireworks as USDA will release its holiday-delayed export sales data, and producers must take action to avoid March cotton’s delivery period on Monday.
Thus far, the month of February has been exemplary for the U.S. cotton trade with either record sales or record shipments for the past three weeks.
Current season sales are running well ahead of USDA’s 2010/2020 forecast and the five-year average. In fact, current business is on the fastest pace since the 2010/2011 season.
Of late, open interest has been hammered. From its peak level of 275,000 contracts on February 3, it presently stands at 211,866 open contracts. The fact open interest has declined from that February low suggests the move was rooted in short-covering.
It is generally thought when price moves higher and open interest declines, that is the result of bears buying back their short-held positions. As it stands, speculators still retain a net-long position in the market.
For Wednesday, close-in support for March cotton lies at 67.85 cents and 67.20 cents, with resistance at 69.00 cents and 60.40 cents. Overnight estimated volume is 5,120 contracts.