DTN Cotton Open: Market Rebounds Overnight

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The cotton market is sharply higher Friday morning in conjunction with the other recovering commodities markets. To a large degree on Wednesday, the Federal Reserve somewhat snatched the financial rug from beneath the markets’ feet with its hawkish slant. In Wednesday’s policy statement the Fed raised its inflation level and suggested it may raise rates sooner rather than later.

That action fired up the US dollar and melted the Commodity Complex. In addition, China ordered certain domestic speculators to liquidate or pare down their holdings. The result was a massive sell-off, taking some market back to the winter lows.

From Thursday’s encouraging export sales report, we note that cumulative sales for 2020/21 have reached 15.95 million bales. Although that amount was off from last year’s 16.73 million, it was above the five-year average of 14.11 million. Sales represent 105% of the USDA’s forecast for the current marketing year versus the five-year average of 108% for this time of year.

Traders are watching the tropical storm that is approaching the US Gulf coast. It is expected to bring heavy rains across the U.S. Delta and the southeast. Otherwise, there is a massive heat wave gripping much of the Western US, with many locales expecting triple-digit readings.

Due to the newly-signed Juneteenth holiday, the CFTC will report on the positions status of hedgers and speculators on Monday. Many traders are anxious to see whether the managed-money funds are showing signs of increasing their net long position.

For Friday, close-in support for December cotton is 83.40 cents and 82.30 cents, while resistance stands at 86.56 cents and 87.10 cents. The estimated morning volume is 7, 285 contracts.

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