Cotton Struggles on Export Sales

The cotton market is trading weaker, despite strong weekly sales reported by USDA. There had been some anticipation China would soon buy a significant amount of old crop cotton, and despite the fact they absolutely did, the market is taking it as a buy-the-rumor-sell-the-fact situation. The government’s report is summarized as follows:

Net sales of 434,800 RB for 2019/2020 were up noticeably from the previous week, but down noticeably from the prior 4-week average. Increases primarily for China (422,400 RB, including 1,300 RB switched from Vietnam and decreases of 18,900 RB), Vietnam (13,900 RB, including 1,800 RB switched from China, 800 RB switched from South Korea, 100 RB switched from Japan, and decreases of 3,000 RB), Pakistan (4,000 RB), Bangladesh (2,600 RB), and Malaysia (1,400 RB, switched from Indonesia), were offset by reductions primarily for Turkey (9,200 RB). For 2020/2021, net sales of 148,500 RB were primarily for China (115,300 RB), Turkey (16,700 RB), and Vietnam (11,900 RB). Exports of 253,700 RB were down 5 percent from the previous week and 31 percent from the prior 4-week average. Exports were primarily to Vietnam (71,800 RB), Turkey (47,700 RB), Pakistan (35,200 RB), China (28,900 RB), and Bangladesh (26,600 RB). Net sales of Pima totaling 400 RB were down 82 percent from the previous week and 60 percent from the prior 4-week average. Increases were primarily for Turkey (200 RB) and Indonesia (200 RB). Exports of 7,000 RB were down 1 percent from the previous week and 67 percent from the prior 4-week average. The destinations were primarily to China (1,800 RB), Pakistan (1,700 RB), Bahrain (1,300 RB), and Turkey (1,200 RB).   

Spot May cotton saw zero deliveries again Thursday, making it one of the quietest notice periods in recent memory. May cotton expires on May 6.

As an important part of the domestic economy, the cotton market continues to sweat the future economic potential of the United States. Many analysts saw Wednesday’s poor showing in the first quarter GDP data as a tip of the bearish economic iceberg that is to come. The faster the nation can safely open up for business, the faster troubled waters can be avoided.   

For Thursday, support for July cotton is 58.00 cents and 57.40 cents, with resistance at 60.00 cents and 61.00 cents. Overnight estimated volume is 6,235 contracts.

Keith Brown can be reached at commodityconsults@gmail.com or by calling (229) 890-7780.