December cotton continues to chip away at the upside as an ice storm in Texas and a tropical storm in the Gulf are keeping bullish traders “keenly bullish!” From Monday night’s high of 72.45 cents, the market stands within arm’s reach of surpassing its annual 73-cent high posted last January.
Monday, USDA reported on the status of the crop. Currently, the nation’s crop is rated 40% good to excellent. That number was unchanged to last week’s status, but off from the 10-year rating of 43% good to excellent. There were declining conditions seen in Texas, Georgia and Arkansas. The pace of harvest stands at 42% gathered versus the prior week’s 34%. The 10-year average for this time of year is 45% complete.
As previously mentioned, Texas is enduring a winter ice storm, which has brought plummeting temperatures, and widespread snow showers. Besides delaying the harvesting efforts there, the weather will likely result in additional yield loss, and further worsen grades. Tropical storm Zeta will likely evolve into a Hurricane Zeta Tuesday is on course to hit the coast of Louisiana. This event may bring adverse rains to the Southeast, which obviously is deep in harvest.
Technically, the market is overbought. Speculators carry their largest net-long position of the year, making the market vulnerable to a setback. Given the 2020 harvest is going full bore, selling pressure may force them to rethink their long-side trend.
For Tuesday, support for December cotton stands at 71.50 cents and 70.60 cents, with resistance at 72.50 cents and 73.00 cents. Overnight estimated volume is 9,330 contracts.