The cotton market is slightly lower Wednesday as it eyes the meltdown occurring in the Chicago grain futures. The decline in the Chicago markets is being blamed on their steep overbought situation and perhaps improving weather in South America. To that end, with little direct news of its own to trade upon, cotton is deferring to those outside negative influences.
Still, the cotton market continues to glow off its January crop report. Within that data, USDA lowered the 2020/21 domestic carry to 4.60 million bales, which is down from 7.25 million in 2019/20 and 4.85 million in 2018/19. Moreover, current U.S. ending stocks are the lowest since 2017/18. The current stocks-to-use ratio is 26%, down from 41.0% in 2019/20 and the lowest since 2017/18.
However, a potential negative for cotton is the U.S. expanding its ban on cotton imports from China’s Xinjiang region. According to Amnesty International, there are concerns China is using forced labor in its textile industry. Such could raise tensions between the U.S. and China.
The U.S. dollar is higher Wednesday amid potential troubles with the new presidential inauguration. Some traders are seeking a flight-to-quality situation on the happenstance something goes awry today and even this week.
For Wednesday, close-in support for March Cotton is 80.10 cents and 78.70 cents, with resistance at 82.10 cents and 82.75 cents. The current estimated volume is 12,827 contracts.