DTN Cotton Open: Lower on Overbought, Awaits Crop Conditions

    Cotton in bloom. ©Debra L Ferguson

    The cotton market is lower Monday morning despite the fact weather forecasts remain price positive. Both the 6-10 and 8-14 day outlooks continue to show hot-and dry conditions prevailing over much of the Southwest. However, the subsequent rally has taken the market to an overbought situation.

    To that point, last Friday’s Commitment of Traders data as compiled by the CFTC showed managed money speculators had net bought some 12,000 plus contracts, swelling their long position to 21,520 contracts. In addition, non-commercial and non-reportable traders were strong buyers as well.

    The market may be smarting from the decline in exports by USDA in its crop report last Friday. Going into the report, exports had been hiked to 16.0 million bales, but fell to 15.0 million bales, as Covid-19 influences are hurting demand. Even with reduction in the ending stocks categories via lower production, stocks-to-use ratio is the second highest since 2007/2008.

    Monday afternoon, USDA will issue its latest crop condition data. All eyes will be focused on the Texas numbers. Last week the Lone Star state was rated 36% very poor/poor. Another major indicator for cotton will be this Thursday’s weekly exports-sales. If there are any cancellations, the validation for reduced demands may get traction.

    For Monday, support for December cotton is 62.92 cents, and 62.45 cents, with resistance at 64.90 cents and 65.80 cents. The current estimated volume is 3,565 contracts.

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