The cotton market’s dramatic rally on Monday is seeing strong follow-through buying Tuesday. Suddenly Texas, the largest cotton producer in the U.S., is suffering mild to moderate drought conditions.
The early tip-off was the national drought monitor’s report of May 28 depicting West Texas achieving an alarmingly dry status. Thus, with net-short speculators covering, and bottom pickers buying, prices have moved markedly higher.
Monday, USDA reported the 2020 crop on a normal planting pace. The national crop stands at 66% planted versus last year’s run of 67%, compared to the 5-year average of 66% complete. Texas is 63% planted versus last year’s 59%, versus the 5-year average of 56% done. Number Two Georgia is 74% complete compared to 2019’s 82%, and to the 5-year average of 78% done.
The National Drought Mitigation Center will update the latest drought picture of the U.S. later Tuesday. Currently, forecasts for the first part of June are calling for above normal temperatures for the entire midsection of the country. Normal to above normal rainfall is expected for the mid-south and Southeast, with below normal rainfall for Texas.
Last Friday, President Trump announced his administration would begin to dismantle certain trade and travel privileges for Hong Kong. In response to Trump’s Hong Kong announcement, China told state-owned firms to suspend large-scale farm purchases including soybeans and pork.
Such a halt will put China further behind in making good on its pledges to boost U.S. purchases by $200 billion over two years. Canceling the Phase One Deal would reignite the nearly two-year U.S.-China trade war at a time U.S. unemployment is at its worst since the Great Depression.
For Tuesday, close support for July Cotton stands at 59.85 cents and 59.45 cents, with resistance at 61.50 cents and 62.00 cents. Current volume is 10,725 contracts.