DTN Cotton Close: Muted Trade Session

Cotton made another contract high in as many days, as the December market posted a 91.00-cent trade. The market is being driven upwards by a well-defined bullish trend, heavy speculator participation, and end-user fixation buying.

The market is also awaiting Thursday’s weekly exports and sales for additional direction. Traders would like to see evidence that the top buyers of last season remain “in the hunt” for the 2021-22 season. Of course, special emphasis will be placed on China.

The Federal Reserve announced “no change” in its monetary policy in its 2 p.m. (ET) statement and actually said the U.S. economy is slightly improving even with COVID-19. Yet, the central bank will continue to backstop the U.S. economy with its buying of U.S. debt.

The Fed is currently purchasing at least $120 billion a month in bonds, with at least $80 billion going to Treasuries and another $40 billion floor on mortgage-backed securities.

In one of those friend-of-a-friend stories, we have been told domestic cotton in China is running as high as $1.20 per pound to its mills. The domestic textile industry there has been tapping into its strategic reserves to the point the government is considering allowing new and deeper import quotas. Also, another underlying reason for expanding quotas is to offset the “politically tainted” cotton originating from the alleged slave labor province of Xinjiang.

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