DTN Cotton Open: Lower on Weak Exports

Mid season cotton near Ft. Cobb, Oklahoma. Photo: Jerry Goodson, OSU

The cotton market is working towards posting its fourth consecutive lower session Thursday morning. After posting its highest price for the move on July 9 at 64.90 cents, the market has steadily been losing upside enthusiasm. Of course, the current rally has been driven by the hot and dry conditions, but such weather markets can only go so far.

To that point, many of cotton’s underlying fundamentals remain negative. That list includes COVID, Chinese geo-political aggressions, and a slowing global economy. There are other problems to be sure. Yet to underscore cotton’s trouble we need only to look at Thursday’s export sales.

Here is that summary: Net sales reductions of 17,500 RB for 2019/2020 were down noticeably from the previous week and from the prior 4-week average. Increases primarily for Vietnam (26,500 RB, including 4,600 RB switched from China, 2,200 RB switched from South Korea, and 1,000 RB switched from Hong Kong), Pakistan (6,400 RB), and Indonesia (2,100 RB, including 1,700 RB switched from Taiwan and 200 RB switched from Japan), were more than offset by reductions primarily for China (38,600 RB), El Salvador (4,000 RB), Peru (3,600 RB), Thailand (2,900 RB), and Bangladesh (1,300 RB).

For 2020/2021, net sales of 29,100 RB primarily for China (8,800 RB), South Korea (6,600 RB), Bangladesh (4,400 RB), El Salvador (4,000 RB), and Indonesia (3,700 RB), were offset by reductions for Pakistan (500 RB). Exports of 311,700 RB were down 5 percent from the previous week and 2 percent from the prior 4-week average. Exports were primarily to Vietnam (94,500 RB), China (91,700 RB), Turkey (36,700 RB), Pakistan (32,900 RB), and Bangladesh (12,700 RB).

Net sales of Pima totaling 5,800 RB were up noticeably from the previous week and up 39 percent from the prior 4-week average. Increases were primarily for China (1,800 RB), Egypt (1,300 RB), Pakistan (1,100 RB), India (600 RB), and Turkey (400 RB). Exports of 800 RB — a marketing-year low — were down 89 percent from the previous week and 88 percent from the prior 4-week average. The destinations were to Pakistan (400 RB), Honduras (300 RB), and Indonesia (100 RB).

It appears that China is fast becoming the first major nation to emerge from COVID economic contractions after announcing a better-than-expected second-quarter GDP. The number was a positive 3.2% versus negative -6.8% for the first quarter, year-on-year. China’s industrial production rose 4.8% in June versus May’s data of 4.4% positive. However, China’s retail sales in June were reported at -1.8% versus -2.8% the month prior. The positive news is the Shanghai composite fell by 4.5%, the sharpest drop since February.

For Thursday, support for December cotton lies at 61.40 cents and 61.14 cents, with resistance at 62.65 cents and 63.00 cents. The current estimated volume is 3,836 contracts.

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