The cotton market was higher Monday with the old crop sharply higher, while the new crop made another round of contract highs. In addition, crude oil posted another sharply lower session.
Old crop cotton, specifically the May contract, is gearing up for its delivery period. Its First Notice Day commences on Monday, May 25. Thus, traders, funds, and growers are forcibly rolling out of spot May into the July of the new crop months to avoid the delivery process. To that end, open interest for May cotton has been on the decline, while July has been increasing.
The new crop continues to punch out new highs amid severe droughts that has a tight grip upon certain southwest states. The weather outlook for the next two weeks, if not longer, indicates no rain for West Texas. Additionally, some growers may be unwilling to commit the total inputs needed due to their exorbitant costs. Thus, yields may be way down as well.
The U.S. dollar is higher Monday, as it anticipates an interest rate hike by the Federal Reserve during its May monthly meeting. The dollar index has yet to close to closing above par, or 100, on this run, but it is nearing its highs achieved during the height of the pandemic scare in 2022.
Monday, May Cotton settled at 133.45 cents, up 2.88 cents, July closed at 133.45 cents, up 2.39 cents and December finished at 117.62 cents, 2.14 cents higher; estimated volume was 63,638 contracts.