May cotton fell for the fourth consecutive day, finishing down 1.26 cents at 66.30 cents and just above the recent low set on Monday. May cotton has now dropped 7 cents from the high set on Jan. 13, as fears of coronavirus demand-destruction and no China activity continues to pressure most ag markets. May cotton is now down over 2 cents from Monday’s panic-driven gap lower opening.
A sharp uptick in cases of coronavirus in countries outside of China, with the most notable being Italy, South Korea, Japan and even Iran has fueled cries of potential pandemic, and investors have flocked to safe haven investments.
Tuesday’s appearance for the first time in both Austria and Croatia has made it a worldwide threat. The Centers for Disease Control (CDC) has now warned Americans to expect an outbreak in the U.S. That has since been downplayed by Larry Kudlow at the White House.
May cotton has now closed for the 2nd straight day below the 100-day moving average, with the 20-day average having crossed over the 50-day to the downside. That is often a bearish sign. The managed money funds are caught net long cotton, with a long of over 31,000 contracts as of last Tuesday.
While U.S. cotton supplies, as detailed in the USDA last week were generally neutral, the market reaction continues to reflect disappointment that China may not be able to honor its phase one commitment.
Dow Jones reported the Cotlook “A” Index to be down 0.35 cent on Monday at 77.70 cents. On a further drop, expect the next level of support on May cotton to be strong at 63 cents to 64 cents.