Source: Agfax.com

By Keith Brown, DTN Contributing Cotton Analyst

September 15, 2020

Cotton Ends Lower, Mulls Storm

The cotton market closed moderately lower Tuesday as traders await the arrival of Hurricane Sally. Although not as intense as previous storms, Sally will still pack a definite wind and rain punch on the 2020 cotton crop.

As noted earlier, about half of the Mississippi/Alabama cotton crops are “bolls open” and thus are vulnerable to some yield loss. In its latest crop update, USDA did lower the crop over 1 million bales. Obviously, any further losses materializing from Sally should push the crop under the 17.0 million bales mark.

In an impressive chart move Monday, spot December cotton did run-up to post a new price high, as well as a new high settlement. It was, in fact, the highest settlement since Feb. 26. To that end, managed-money speculators continue to hold a sizable net long position, as they attempt to stick to the bullish trend. Subscribers will remember the cotton market posted a significant April low, as did so many other markets, when the perils of COVID-19 seemed sufficiently “discounted.”

There are some concerns in the export circles over the growing trend to shun certain textile products, among others, coming out of China. The problem rests with the overwhelming evidence China indeed uses forced, that is slave labor, to help in the operations of her textiles industry.

Initially, the European Union banned finished goods from Xinjiang Province, notorious for hosting “concentration camps” filled with Muslims and other minorities. As recently as Monday, the U.S. signed on to establish similar restrictions. How these actions reflect on the U.S./China trading relationship remains to be seen. The first evidence of any such wrinkle may show this Thursday when USDA issues its weekly export sales report.

For Tuesday, December cotton closed at 66.44 cents, down 0.18 cent, March finished at 67.24 cents, down 0.22 cent and December 2021 settled at 66.26 cents, down 0.52 cent. Tuesday’s estimated volume was 31,468 contracts. (Source: Agfax.com)