The cotton market sloughed off triple-digit losses to close positively Tuesday. Its recovery was inspired by uplifts in several outside markets, including the grains, the energies, the metal, and the stock index futures. Also, the lower U.S. dollar helped encourage inflation-sensitive markets higher as well.
Chart wise, cotton remains in a steep uptrend, but does face fundamental resistance from the unfolding harvest and a reduced net-long speculative position. Additionally, traders are becoming wary of China’s economic health and its blatant provocative actions against Taiwan and the United States.
The U.S. harvest is progressing, but is below its 10-year pace. A few Texas growers informed us that their early dryland yields are running three-fourths to a full bale per acre. They plan on hitting the irrigated fields late next week. However, there was a drop in temperatures early this week, causing some low-lying cotton fields to be nipped a bit.
Traders will be interested in this week’s export sales, perhaps more than usual. Of late, China has greatly slowed its buying spree and that is cause for concern. Of course, part of its hesitancy is the global shipping crisis, plus it’s gathering its own crop.
We note that cumulative sales for 2021-22 have reached 7.617 million, well below the five-year average of 7.844 million bales. Sales have reached 52% of USDA’s forecast compared to the five-year average of 55% for this time of year.
For Tuesday, December settled at 107.13 cents, up 0.79 cent, March ended at 105.84, plus 0.89 cent and December 2022 ended at 90.88 cents, 0.50 cent higher; estimated volume was 25,328 contracts.