Cotton In Recovery

Pulled and pushed by its own technical and fundamental fortunes — as well the surrounding geopolitical drama — the cotton market is recovering from its overnight plunge. From its 76-cent peak of Tuesday, the December contract has fallen nearly 2 cents, but as of Wednesday morning is only slightly lower. Traders are hoping the declared U.S./Iran ceasefire will allow the cotton market to trade its own direct fundamentals. 

Thursday at 8:30 a.m. EDT, USDA will issue a new round of export sales. Last week saw combined seasonal sales over 488,000 bales. Shipments were 356,000, down 11% weekly.  

Also on Thursday, USDA will update its supply-demand tables via the April WASDE. For that report, the average trade expectation has US production at 13.83 million bales. If realized, that number would be down slightly from 13.92 million in the March update. Exports are expected to come in around 11.99 million bales versus 12.00 million in March. Ending stocks are expected at 4.36 million versus 4.4 million in March. World production is expected at 120.66 million bales (range 119.56-121.00) versus 120.99 million in March. Consumption is expected at 118.64 million compared to the 118.58 million in March, and ending stocks are expected at 76.25 million versus the 76.39 million in March.

This Friday, traders will see a fresh readout of consumer prices via the April CPI. Despite the ceasefire, increased fuel prices will likely be slow to recede. Thus, inflation may see a bump in its numbers for the next few months. The report is out at 8:30 a.m. EDT.

Also on Friday, the CFTC will update its Commitments of Traders data. Last week the managed-money funds had net bought some 21,000 positions, reducing their net-short carry to 12,266 contracts. 

Chart support for July cotton stands at 72.40 cents and 72.00 cents, with resistance around 74.50 cents and 75.00 cents. Wednesday morning’s estimated volume is 39,897 contracts.

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