The cotton market is quietly higher Wednesday as traders await Thursday’s weekly export sales and spot December’s delivery period next week.
Export sales have been running below the monthly average as the global supply chain crisis is choking the flow of materials. The one big positive is that China continues to be a dominant buyer. USDA will issue its update at 8:30 a.m. EST Thursday.
December cotton will enter delivery period next Tuesday, meaning the majority of traders in the lead month must vacate by Monday’s close or risk the perils of the notice event. At one time there was talk of a possible squeeze on the contract given the strong demand, the lateness of the 2021 crop and the small amount of certified stocks, but those fears seem to have abated.
There is talk that the domestic price of cotton in China is greater than first thought. The basis for this thinking lies in the fact China is not only the chief buyer of U.S. cotton, but is simultaneously conducting their own domestic auctions from their own stash to supply the mills. Thus, some technical traders think a December close over 121 will lead to the 127 area, while a decline under 115 could cause the market to fall to the 110 level.
For Wednesday, close-in support for December cotton is 116.20 cents and 115.50 cents, while resistance stands at 119.20 cents and 120.10 cents. The estimated morning volume is 8,201 contracts.