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DTN Morning Cotton Commentary 01/17 08:40
Cotton Higher on Data Re-Think
In a reversal after three days of lower closings, the cotton market is
demonstratively higher Friday morning.
By Keith Brown
DTN Cotton Correspondent
In a reversal after three days of lower closings, the cotton market is
demonstratively higher Friday morning. No one should really be surprised, given
that the market witnessed the signing of the partial Phase One deal with China,
the passage of the USMCA trade agreement by the U.S. Senate, a record Dow
Jones, plus strong export sales. Apparently, with such bullish news as a
backdrop, the market did not want to become overly bearish.
This weekend will mark the observance of the MLK Holiday, thus the ICE
cotton market will be closed Monday, resuming trading Monday night. Of course,
that closure means next week's export sales will be pushed back to Friday.
Open interest continues to rise, indicating the speculators are adding to
their net long position. Subscribers will recall how speculators were net
short, even record net short at times, for nearly all of 2019. However during
the harvest of 2019, as the spot cotton began to rise, speculators started to
initiate short-covering action. Yet, when the market closed over the 200-day
moving average, speculators saw that as a clarion call to actively reverse
their bearish positions, and buy net long.
Thursday's strong export sales continue to under-gird prices. To that end,
cumulative sales have reached 11.585 million bales sold, which is the strongest
pace since 2010/2011. Interestingly, that season saw the cotton market trade
historic highs. To date, current season sales have reached 77% of USDA's
original forecast. This number compares to the 5-year average of 72%.
For Friday, support for March cotton is 69.70 cents and 69.08 cents, with
resistance at 72.00 cents and 72.50 cents. Overnight estimated volume is 13,868
contracts.
Keith Brown can be reached at commodityconsults@gmail.com or by calling
(229) 890-7780.
(KR)
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