The cotton market is following the bearish lead of the Dow Jones futures as the December contract has broken 70-cent support. Yesterday, December cotton posted a new high (72.60) for its seven-month bull rally but reversed upon seeing the Dow collapse nearly a thousand points.
The cotton market had been driving higher based on a string of adverse weather events, including the current Hurricane Zeta which just made landfall in Louisiana Wednesday. However, the fear that a resurgence of COVID might end the economic recovery in the U.S. proved too bearish for most markets.
On a better note, USDA did report improved export sales data Thursday morning, including a marketing-year-high sales number for U.S. Pima cotton.
The summary of the report is as follows: Net sales of 288,700 RB for 2020/2021 were up 27 percent from the previous week and 56 percent from the prior 4-week average. Increases primarily for Pakistan (125,900 RB, including decreases of 700 RB), China (81,400 RB, including decreases of 12,500 RB), Mexico (41,600 RB, including decreases of 2,800 RB), Egypt (26,400 RB), and Vietnam (25,800 RB, including 2,100 RB switched from Japan and decreases of 1,900 RB), were offset by reductions primarily for Turkey (40,300 RB).
For 2021/2022, net sales of 900 RB resulting in increases of Mexico (3,100 RB) and Brazil (400 RB), were offset by reductions for China (2,600 RB). Exports of 228,800 RB were up 18 percent from the previous week and 23 percent from the prior 4-week average. Exports were primarily to China (103,600 RB), Vietnam (22,600 RB), Mexico (17,500 RB), Pakistan (16,200 RB), and Indonesia (12,500 RB).
Net sales of Pima totaling 32,700 RB–a marketing-year high–were up 10 percent from the previous week and 47 percent from the prior 4-week average. Increases were primarily for China (10,600 RB, including decreases of 2,200 RB), India (6,000 RB), Vietnam (5,400 RB, including 900 RB switched from Hong Kong), Pakistan (4,100 RB), and Thailand (2,000 RB), were offset by reductions for Hong Kong (900 RB). Exports of 15,900 RB were up noticeably from the previous week and up 36 percent from the prior 4-week average.
The destinations were primarily to China (6,700 RB), Bangladesh (2,900 RB), Vietnam (2,600 RB), India (1,000 RB), and Pakistan (700 RB).
As the cotton market winds its way towards month’s end this Friday, speculative traders may feel the need to book profits and additional selling may unfold. Harvesting efforts across the South may be delayed due to the effects of Hurricane Zeta.
The 1-5 day forecast calls for heavy rains in the Delta and the Southeast, as well as the Texas Panhandle. However, the 6-10 day outlook calls for above normal temperatures and below normal rainfall for much of the cotton growing belt.
For Thursday, support for December cotton stands at 69.50 cents and 68.75 cents with resistance at 71.40 cents and 73.25 cents. Overnight estimated volume is 10,011 contracts.