The cotton market is lower Friday morning as the negativity of Thursday’s tariff sell-off continues to pound cotton overnight. Of course, Thursday was a free-for-all as most markets in the commodities complex were decisively hammered. The genesis of the break was a tweet from President Trump indicating he would impose an additional 10% tariffs on some 300 billion dollars of imported Chinese goods.
Thursday’s steep selloff took the market to fresh contract lows on the strongest volume since July 10. Of course, it wasn’t the tariffs news alone which sent prices down. Earlier in the week, the trade talks between the U.S. and China in Shanghai ended with no clear result. Then, the Fed’s rate cut, coupled with its dovish commentary, failed to pressure the U.S. dollar. Thus, the stage was set for a decline.
The International Cotton Advisory Council (ICAC) reported Thursday it is looking for overall increased global production. Essentially, it says global cotton production will swell to 27.2 million tons while consumption will be 26.9 million tons, leaving a 300,000 ton surplus.
The 6-10 day weather forecast is calling for above normal temperatures and below normal rainfall. Temperatures in Texas are supposedly running above the 10-year average. As of now the national crop is rated 61% good/excellent. USDA will issue new condition data on Monday. If the 2019 crop is huge and if demand is slack, ending stocks could rise to their highest levels since 2008/2009.
For Friday, support for December cotton is not established as new contract lows were posted, although the 60-cent level is psychological support. Resistance stands at 64.00 cents and 64.50 cents. Overnight estimated volume is 9,990 contracts.