The cotton market is lower Friday morning as it is attempting to digest news from several events. First, the jury is out on Hurricane Sally, but it would appear damage to the southern cotton crop was not as bad as potentially thought.
Secondly, the fact the market ignored such strong export sales has traders worried that speculators, who carry a deeply net bullish position, will soon become disappointed with cotton’s inability to move higher and elect to liquidate friendly holdings. Such selling could send prices significantly lower.
Lastly, there is the impending 2020 harvest. Even with 17 million bales, there should be the traditional selling pressure associated with gathering, so the market has a lot to consider as it makes its next move.
Statistically, cumulative sales for the current season have reached 56% of USDA’s forecast versus the five-year average of 46% for this time of year. Numerically, cumulative sales stand at 7.630 million bales versus 8.322 million for last year and 8.835 million for 2018. The five-year average is 6.315 million. With a weaker U.S. dollar into 2021, and the possibility of a global recovery, U.S. cotton exports may reach even higher levels.
Next week, the market will see new crop condition numbers on Monday. That report may infer what damaged Sally caused. Then on Thursday, USDA will issue another round of export sales, although this week’s report will be a hard act to follow.
For Friday, close-in support for December cotton lies at 65.40 cents and 65.00 cents, with resistance at 66.10 cents and 67.00 cents. The current estimated volume is 4,018 contracts.