Cotton Ends Lower, Awaits USDA Data
The cotton market finished slightly lower Thursday amid a strong export number and continued forecast of a hot and dry Texas. Earlier in the session, New crop posted a very strong technical spike in response to a Chinese shipment, but halted “this side” of the 65.00-cent level. The stopping point occurred right about the 62% retracement level, as pulled from the January high to the April low.
Thus, some speculative selling appeared to slow and then stop the rally. The weather forecast for top producer Texas is looking as grim as ever. Next week, consecutive days of triple-digit temperatures are expected. However, on the flip side, much of the cotton belt is looking superior. From Virginia down to Georgia, across to the Delta, ample rain has fallen, resulting in very strong stands.
Friday, USDA will offer its latest take on the 2020 crop. Several industry analysts are looking for a smaller crop given the surprise reduction in acres. The average guess stands at 18.0 million bales, down from the June estimate of 19.50 million. Also, as we work through the math, domestic ending stocks may come in at 6.90 million bales, down from last month’s 8.0 million. World carryout is expected to be mitigated as well.
Spot July cotton expired Thursday at 63.34 cents, down 1.32 cents. Originally, this contract held the great promise of the phase-one deal. However, between COVID-19 and Chinese manipulation, it was a price disaster.
December cotton closed at 63.89 cents, down 0.27 cent, March ended at 64.49 cents, down 0.20 cent and December 2021 finished at 63.74 cents, up 0.13 cent. Estimated volume was 22,987 contracts.