The cotton market was lower overnight as traders are squaring some positions ahead of month’s end. Sometimes trading funds will book a certain percentage of their profits as a means to dress up their disclosure documents to raise even more money for their training programs.
Although USDA’s weekly export sales report did show higher sales than last week, actual shipments were lower. To that end, we always favor higher shipments as being superior to sales.
A summary of that report is as follows:
Net sales of 322,700 RB for 2020/2021 were up 10 percent from the previous week and 22 percent from the prior 4-week average. Increases were primarily for Turkey (65,900 RB), Vietnam (62,400 RB), Pakistan (57,800 RB), China (36,400 RB), and South Korea (24,000 RB).
For 2021/2022, net sales of 53,600 RB primarily for South Korea (15,800 RB), Thailand (10,600 RB), Pakistan (8,400 RB), Japan (8,000 RB), and Vietnam (6,700 RB), were offset by reductions for Guatemala (7,100 RB). Exports of 275,300 RB were down 15 percent from the previous week and 4 percent from the prior 4-week average.
Exports were primarily to China (112,400 RB), Vietnam (47,900 RB), Pakistan (36,400 RB), Mexico (22,300 RB), and Bangladesh (11,700 RB. Net sales of Pima totaling 25,800 RB were up 8 percent from the previous week and 27 percent from the prior 4-week average. Increases were primarily for India (9,900 RB), Pakistan (6,100 RB), Peru (3,400 RB), Vietnam (1,200 RB), and Egypt (1,100 RB).
Exports of 12,600 RB were up 51 percent from the previous week and 8 percent from the prior 4-week average. The destinations were primarily to India (4,800 RB), Vietnam (2,600 RB), China (2,200 RB), Peru (1,200 RB), and Egypt (900 RB).
The U.S. dollar is hovering just below a key technical resistance. The 90.95 high of December 21 and the 90.94 level of January 18 serves as strict overhead resistance. However, if the Greenback were to close above that resistance, some currency traders may interpret such action as dollar positive. Wednesday, the Federal Reserve left interest rates unchanged and promised to keep buying U.S. debt long after the economy turns positive.
Cotton is vulnerable to a serious technical correction into early February if outside forces, such as Chicago grains and Dow jones, were to tank. Traders will also watch the China/U.S. trade situation in regards to the Xinxiang ban set in motion by the Trump Administration, and thus far, kept intact by the new Biden Administration.
For Thursday, close-in support for March cotton is 79.50 cents and 79.00 cents, with resistance at 82.50 cents and 83.00 cents. The current estimated volume is 19,675 contracts.