DTN Cotton Open: Sharply Higher on Inflation

    Cotton modules lined up in a gin yard. ©Debra L Ferguson

    The cotton market surged to ten-year highs Wednesday morning as traders are sensing inflation is here to stay. It is thought certain speculative money may be leaving the various stock markets to wander over into the world of commodities. Also supporting the higher price move is the fact USDA surprisingly lowered the 2021 production in its January WASDE.

    Some news wires are reporting a smaller Indian crop Wednesday morning. Reportedly the Cotton Association of India has lowered 2021 production by 3.5%, the result of heavy harvest rains and a pink bollworm infestation. The group also increased Indian domestic consumption, which suggests there will be less cotton for internal exports.

    The U.S. dollar is lower Wednesday as traders have been dialing in on next week’s meeting of the Federal Reserve. In a move that should surprise no one, the Fed will meet to perhaps initiate a new era by increasing interest rates to combat inflation.

    Oil prices have risen to a seven-year high as an outage on a pipeline from Iraq to Turkey increased concerns about an already tight supply outlook. Turkey’s state pipeline operator Botas said on Tuesday that it cut oil flows on the Kirkuk-Ceyhan pipeline after an explosion on the system. The cause of the explosion is not known.

    For Wednesday, close-in support for March cotton is 120.00 cents and 118.15 cents, while resistance stands at 124.00 cents and 125.00 cents. The estimated morning volume is 8,988 contracts.

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