May cotton closed down 1.44 cents Monday at 67.56 cents, a fourth consecutive day lower with pressure from widespread selling in commodities and U.S. stocks, related to fears about the spread of coronavirus.
Over the weekend, new cases emerged in Japan, South Korea, Italy and Iran, adding to concerns that the virus may no longer be containable. Other than creating transportation problems, it is difficult to make a case for cotton prices based solely on coronavirus, but investors were in no mood for reason on Monday, making a universal scramble to cash or in some cases, gold.
Technically, May cotton fell below its 100-day average Monday for the first time since October, but was still able to finish above the previous 2020 low of 67.30 cents.
More important than coronavirus to understanding U.S. cotton prices in 2020, USDA issued new-crop estimates for world and U.S. cotton supplies Friday, all of which were roughly neutral compared to the 2019-20 season.
For the U.S., USDA expects 12.5 million acres of planted cotton in 2020, down from 13.74 million acres a year ago. U.S. ending cotton stocks are expected to come down slightly, from 5.40 million bales in 2019-20 to 5.30 million bales in 2020-21.
USDA’s average farm price estimate of 64 cents a pound will not excite producers and, if true, would only represent a small increase from 2019.
Friday’s CFTC data showed noncommercials net long 37,313 contracts as of Feb. 18, a position that was likely trimmed on Monday.
Dow Jones reported the Cotlook ‘A’ Index was down 0.25 Friday at 78.05 cents per pound. There were 34,062 certificated cotton stocks on Friday, up 629 from Thursday.