DTN Cotton Open: Market Suffers on Higher Dollar

The cotton market is moderately lower Thursday morning as the U.S. dollar is ratchetting higher. Traders are fearful next week’s Federal Reserve meeting will result in some kind of tapering which will be a precursor to higher interest rates. In addition to a higher Dollar Index Thursday morning, gold and silver, which are considered inflation markets, are being crushed.

USDA issued its weekly exports-sales data Thursday morning, and essentially the data was deemed “okay”. Sales were off some 40% from last week, but China was the top buyer. A summary of the report is as follows:

Net sales of 284,800 RB for 2021/2022 were down 37 percent from the previous week, but up 9 percent from the prior 4-week average. Increases were primarily for China (183,900 RB), Pakistan (33,800 RB), Turkey (17,600 RB), Peru (12,300 RB), and Vietnam (10,100 RB, including 1,300 RB switched from Japan).

Exports of 237,500 RB were up 53 percent from the previous week and 27 percent from the prior 4-week average. The destinations were primarily to China (86,600 RB), Pakistan (39,200 RB), Vietnam (35,600 RB), Bangladesh (25,000 RB), and Turkey (13,700 RB).

Net sales of Pima totaling 9,600 RB were down 21 percent from the previous week and 26 percent from the prior 4-week average. Increases were primarily for India (2,600 RB), Peru (2,400 RB), Indonesia (2,000 RB), China (1,300 RB), and Japan (600 RB). Exports of 3,100 RB were down 74 percent and 57 percent from the prior 4-week average. The destinations were primarily to India (2,500 RB) and China (400 RB).

Hurricane Nicholas continues to hug the Gulf Coast, bringing unwanted rains to the extreme southern parts of the Delta and southern cotton crops, while some traders are beginning to anticipate the advent of the 2021 harvest. In other weather news, the 6 to 10 and 8 to 14-day outlooks call for above normal temperatures across much of the cotton belt.

Specifically, the Delta and Southeast have above normal precipitation in their respective 6 to 10-day, but conditions do dry out in the 8 to 14-day forecast. West Texas appears to be dry for two weeks.

For Thursday, close-in support for December cotton is 92.40 cents and 92.00 cents, while resistance stands at 94.55 cents and 95.20 cents. The estimated morning volume is 5,911 contracts.

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