Even a hurricane could not lift the cotton market from its negative situation. Over the weekend, Hurricane Barry (Category 1) made landfall, and is presently moving across the U.S. Delta. Rain totals range from five to ten inches. Yet, it seems Barry was not the storm many forecasters has anticipated. New Orleans seems to have dodged a bullet, but rains and flooding will negatively impact many areas. It will be a day or so before any real picture can be formed.
USDA’s crop data from last week was not supportive to the market. The government pegged the domestic 2019 crop at 22 million bales, while cutting global usage one million, thus increasing global carry to 80.42 million bales. In addition, the U.S. and China are nowhere close to a trade deal.
At the G-20 meeting, China and the U.S. agreed to renew the talks, but China also agreed to buy huge amounts of U.S. agriculture products in the interim. To date they have not, and last week, President Trump publicly called them out. Of course, such a public scathing probably deepens the resistance of the Chinese to reach a deal.
This week the Federal Reserve meets to discuss interest rates. It is widely expected the Fed will ease Fed Funds one quarter point. In anticipation of that action, the Dow Jones, along with all other major indices, has already posted all-time highs. Such action can make the financial markets a bit top-heavy, which could result in an ultimate correction. If that retreat occurs, and is severe enough, it will be yet another reason the cotton market will have a difficult time rallying.
For toady support for December cotton is 62.60 cents, with resistance at 64.15 cents and 64.70 cents. Overnight estimated volume is 3,500 contracts traded.