DTN Cotton Open: Sharply Lower on Fed, China

Clean young cotton field in the Lower Rio Grande Valley. Photo by Danielle Sekula Ortiz.

The cotton market is trading 150 points lower as bearish actions from the Federal Reserve and China are weighing on prices. Essentially, from its policy meeting of Wednesday, the Fed sees inflation higher down-the-road, and thus has moved up its timetable to raise interest rates. That action is sending the U.S. dollar higher.

Additionally, China ordered certain Chinese speculators to liquidate their commodity holdings with emphasis in the precious metals. Gold is now down $80/ounce.

USDA issued its weekly export sales report Thursday morning which had decent numbers. From their website the summary reads as follows:

Net sales of 111,300 RB for 2020/2021 were up 3 percent from the previous week, but down 22 percent from the prior 4-week average. Increases primarily for Pakistan (53,000 RB, including decreases of 100 RB), Turkey (17,800 RB), Indonesia (9,700 RB, including 400 RB switched from Japan), Mexico (6,500 RB, including decreases of 6,600 RB), and Vietnam (5,900 RB, including 400 RB switched from Japan), were offset by reductions for the Philippines (100 RB).

For 2021/2022, net sales of 102,900 RB primarily for Pakistan (84,600 RB), Turkey (7,900 RB), Indonesia (5,300 RB), Vietnam (4,800 RB), and Japan (3,600 RB), were offset by reductions for China (8,800 RB). Exports of 303,800 RB were up 18 percent from the previous week, but down 6 percent from the prior 4-week average.

Exports were primarily to Vietnam (97,800 RB), Turkey (49,100 RB), China (38,100 RB), Pakistan (31,200 RB), and Mexico (20,600 RB).

Net sales of Pima totaling 2,300 RB–a marketing-year low–were down 40 percent from the previous week and 71 percent from the prior 4-week average. Increases were primarily for China (900 RB), Bangladesh (400 RB), Thailand (400 RB), Germany (300 RB), and Vietnam (200 RB).

Exports of 12,000 RB were down 28 percent from the previous week and 13 percent from the prior 4-week average. The destinations were primarily to India (4,200 RB), Turkey (3,000 RB), Honduras (1,000 RB), Egypt (1,000 RB), and Japan (900 RB).

The 6-10 and 8-14-day forecasts call for below normal temperatures and above normal precipitations for the Delta and Southeast. For West Texas, the outlook calls for above normal temps and below normal precipitation. The brewing Gulf storm is expected to come across lower Louisiana, traveling across Mississippi, Alabama, and into Georgia. Some of those areas are already afflicted with too much wetness.

For Thursday, close-in support for December cotton is 84.40 cents and 83.92 cents, while resistance stands at 86.00 cents and 86.40 cents. The estimated morning volume is 10,167 contracts.

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