The cotton market is slightly lower Friday as some speculators are talking profits while some producers are hedging their crop. Thus far, December cotton has enjoyed a strong up week, within a strong up month, crowned by the fact the market went positive on the year just this week.
Friday afternoon, the CFTC will issue another Commitment of Traders report, detailing the trading structure of the market. In its last data, the regulator showed certain money-managed speculators net-long nearly 60,000 contracts. That amount represents the equivalent of 6 million bales of cotton. Obviously, speculators cannot be that heavily long without taking the market to an overbought status.
Thursday night, the last presidential debate occurred, with President Trump the only candidate mentioning and praising the U.S. farmer. That notation has to be worth something. The administration and the House Speaker are trying to work out a new stimulus deal but remain far apart on several key issues. The most glaring is the Democrats want money to spend on things not directly related to COVID-19.
Cumulative sales for the current marketing year have reached 63% of USDA’s original target. The five-year average is 53%. Numerically, sales currently stand at 8.46 million bales versus 9.10 million for this time last year. The largest buyer of U.S. cotton in this week’s exports sales was Pakistan, supposedly the world’s fourth largest producer. That news should speak volumes to the trade.
Weather wise, the six- to 10-day forecast calls for above normal rainfall for the U.S. Delta and the Southeast. That will raise concerns over the pace of harvest and declining grades. On Monday, USDA will update those aspects of the cotton market.
The U.S. harvest continues and will be updated Monday afternoon by USDA. Currently, the 1- to 5-day outlook shows moderate rainfall across the Delta and the Southeast. The six-to-10 day simply calls for above average precipitation, while the eight-to-14 day promotes a drier situation. As of last Monday, the U.S. crop harvest was 34% complete.
For Friday, support for December cotton stands at 71.25 cents and 70 cents, with resistance at 72.20 cents and 73.00 cents. Overnight estimated volume is 6,191 contracts.