As the Dow Jones and related financial markets ponder the effects of a coronavirus relief bill, the cotton market is searching for its own path. The U.S. Congress is set to pass a multi-trillion dollar support bill aimed at steadying the U.S. economy.
With so many textile manufacturers temporarily closing down production and retail stores across the country shuttered, cotton prices have taken quite a hit. The current weak demand has brought the ICE futures right on the 50-cent level, and appears poised for even lower levels.
A huge impediment to a rally in cotton prices is the amount of on-call, or price-later contracts, producers are holding. As time melts away for the old crop, producers feel pressured to sell every rally. Thus every “up” in the trade is met with fixation selling. Unfortunately, history teaches those who are reluctant to sell will only find prices worse down the road.
Thursday, USDA will issue its latest export sales report. Of late, those sales have been running record strong as foreign buyers are taking advantage of cheap U.S. cotton. Yet, strong sales are no guarantee of a recovery cotton market. In fact, they have largely been ignored as the Dow Jones has cast its bearish spell on the majority of financial and commodities markets.
For Wednesday, close-in support for May cotton is 50.60 cents and 50.00 cents, with resistance at 53.40 cents and 55.40 cents. Overnight estimated volume stands at 9,809 contracts.