DTN Cotton Open: Market Spills on Weak Exports

The cotton market is trading lower Thursday morning as USDA reported net negative sales for the 1019/2020 season.

A summary of the data is as follows: Net sales reductions of 10,100 RB for 2019/2020 were down noticeably from the previous week and from the prior 4-week average.

Increases for Taiwan (3,300 RB, including 900 RB switched from Bangladesh and decreases of 100 RB), Bangladesh (3,200 RB), Indonesia (1,500 RB, including 2,100 RB switched from Malaysia and decreases of 100 RB), South Korea (1,300 RB, including decreases of 200 RB), and Thailand (400 RB, including decreases of 400 RB), were offset by reductions primarily for Turkey (12,200 RB), Vietnam (4,400 RB), and Malaysia (2,100 RB).

For 2020/2021, net sales of 12,400 RB for Vietnam (8,800 RB), China (5,500 RB), Turkey (4,400 RB), Pakistan (1,100 RB), and Egypt (900 RB), were offset by reductions for Honduras (6,100 RB) and Peru (2,200 RB). Exports of 237,900 RB were down 11 percent from the previous week and 16 percent from the prior 4-week average.

Exports were primarily to Vietnam (84,900 RB), China (45,100 RB), Pakistan (43,900 RB), Turkey (24,000 RB), and South Korea (10,200 RB).

Net sales of Pima totaling 500 RB were down 95 percent from the previous week and 85 percent from the from the prior 4-week average. Increases for Djibouti (2,200 RB, switched from China), Turkey (400 RB), and Peru (200 RB), were offset by reductions for China (2,200 RB) and India (100 RB).

Exports of 2,100 RB were up 57 percent from the previous week, but down 50 percent from the prior 4-week average. The destinations were primarily to Indonesia (900 RB), Pakistan (700 RB), and India (400 RB).

Upon the release of the report, the ICE futures traded markedly lower.

As the 2019/2020 season approaches its end, U.S. export sales have been running a very strong pace. Vietnam has been the top buyer, with China a close second. However, the market is concerned with the souring U.S.-Sino relationship and that future business could be impacted.

In fact, China has ordered a certain number of domestic importers to halt the buying of U.S. agricultural products. Currently, cumulative cotton sales have reached 117% of USDA’s target as compared to the 5-year pace of 103% for this time of year.

Into Friday, the two-week weather forecast has dryness staying in Texas and potentially spreading eastward into the Delta and Southeast late this week. Additionally, the Labor Department will release its monthly jobs data Friday.

Between the deliberate shuttering of the U.S. economy due to the coronavirus and now the anarchy unfolding across America’s cities, the jobs situation may worsen.

For Thursday, support for July cotton is 59.00 cents and 57.85 cents, with resistance at 61.15 cents and 62.10 cents. Current estimated volume is 6,445 contracts.

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