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DTN Morning Cotton Commentary 04/23 07:48
Cotton Struggles to Bottom
After a much-welcomed positive Monday, some traders were anticipating an
even stronger Tuesday, but thus far, that is not happening.
Keith Brown
DTN Contributing Cotton Analyst
After a much-welcomed positive Monday, some traders were anticipating an
even stronger Tuesday, but thus far, that is not happening. Speculators
continue to liquidate their still net long position, while growers are panic
pricing their 2023 production. It may take time and positive economic
fundamentals to put a tourniquet on the market's hemorrhaging.
Monday afternoon, USDA reported the 2024 crop stands at 11% planted. That
number was in line with the five-year historical pace of being 11% seeded for
this time of year.
Spot May will enter its delivery on Wednesday, April 24. Coming into
Tuesday's trade, the open interest for the May contract stood at 3,197
contraction. It should be noted that ICE approved certificate stocks have been
on the rise and are the highest since June 2021.
The U.S. Drought Monitor will be updated Tuesday, but its particulars will
not be released until Thursday morning. Moisture conditions for much of the
U.S. Cotton Belt seem to be more than adequate to jump-start the 2024 crop. For
context, the monitor's prior reading showed some 9% of U.S. production area as
being in the drought category, versus the 40% reading of one year ago, and 55%
drought two years ago.
The six-to-ten-day weather forecast shows that temperatures will be above to
much-above normal for the U.S. Cotton Belt. Rainfall is pegged to be normal to
above for Texas, and normal for much of the Delta and the Southeast.
The U.S. dollar continues to be a huge thorn in the export side of U.S.
cotton. For the past several months, the Greenback has undermined an already
tenuous U.S. export situation. Currently, another nemesis is emerging in the
form of serious competition from Brazil and Australia. Their respective crops
are maturing and are less expensive. Moreover, in Australia's case, her
proximity to Asia makes Aussie exports more desirable.
For Tuesday, chart support for July cotton stands at 81.00 cents and 80.20
cents, with 83.20 cents and 84.00 cents as resistance. Tuesday morning's
estimated volume stands at 6,540 contracts.
Keith Brown can be reached at commodityconsults@gmail.comor by calling (229)
890-7780.
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