Is cotton entering a bull market?

January 12, 2018 09:57 AM

General Comments:
  Cotton was sharply higher to limit up in response to a week of very strong export sales and reports of increased mil buying that appeared after prices held support areas on the charts. The market is expecting USDA to show bullish U.S. and world data and knows that buyers in the cash market still have to buy a lot of futures contracts to fix prices for the on-call cotton.  

Trends are up in front of the USDA reports that will be released later today. Price Group expects few changes to U.S. production estimates as the cotton production appears to have held well. USDA can show increased export demand and slightly smaller ending stocks, although overall supplies should still be big. However, the hurricanes and the freeze appear to have really damaged quality and the quality losses have forced mills and exporters to pay up for better quality cotton. Producers remain limited sellers at best. 

Overnight News:  The Delta and the Southeast will get precipitation today, then dry conditions. Temperatures should be below normal.  Texas will see mostly dry conditions.Temperatures will be on both sides of normal. The USDA average price is now 79.96 ct/lb. ICE said that certified stocks are now 47,942 ba1es, from 47,942 bales yesterday. 

Chart Trends:  Trends in cotton are up with major objectives.  Support is at 8160, 8000, and 7940 March, with resistance of 8280, 8400, and 8460 March.

General Comments:  FCOJ closed mixed and prices remain in a trading range as the market prepares for the next round of USDA production reports. The reports will be released later today.  Trade expectations for the report are hard to find. The current weather is good as temperatures are warm and there is little rain around, but the crop is small anyway, and the charts still show that a potential short-term bottom has formed. USDA could curt its production estimates a little bit again. 

The harvest is progressing well and fruit is being delivered to processors and the fresh fruit packers. Trees in Florida that are still alive now are showing fruit of good sizes, although many have lost a lot of the fruit.  Florida producers are actively harvesting and performing maintenance on land and trees. Processors mostly getting field-run fruit. 

Overnight News:  Florida should get mostly dry weather and above normal temperatures.  Brazil should get scattered showers and near to above normal temperatures. ICE said that no January deliveries were posted yesterday and that total deliveries for the month are now 2 contracts.

Chart Trends:  Trends in FCOJ are mixed.  Support is at 134.00, 132.00, and 131.00 March, with resistance at 138.00, 140.00, and 141.00 March.

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About the Author

Jack Scoville is a veteran futures market analyst specializing in grains, softs, rice, oilseeds, and tropical products such as coffee and sugar. His industry contacts in South America, Europe, Asia, and North America provide him with a unique and comprehensive view of these markets. Jack began working in the futures industry over 30 years ago and spent 10 years working on the floor of the Chicago Board of Trade in various roles, starting with The PRICE Futures Group since it was established in 1988.