DTN Morning Cotton Commentary          01/17 08:40

   Cotton Higher on Data Re-Think

   In a reversal after three days of lower closings, the cotton market is 
demonstratively higher Friday morning.

By Keith Brown
DTN Cotton Correspondent

   In a reversal after three days of lower closings, the cotton market is 
demonstratively higher Friday morning. No one should really be surprised, given 
that the market witnessed the signing of the partial Phase One deal with China, 
the passage of the USMCA trade agreement by the U.S. Senate, a record Dow 
Jones, plus strong export sales. Apparently, with such bullish news as a 
backdrop, the market did not want to become overly bearish. 

   This weekend will mark the observance of the MLK Holiday, thus the ICE 
cotton market will be closed Monday, resuming trading Monday night. Of course, 
that closure means next week's export sales will be pushed back to Friday. 

   Open interest continues to rise, indicating the speculators are adding to 
their net long position. Subscribers will recall how speculators were net 
short, even record net short at times, for nearly all of 2019. However during 
the harvest of 2019, as the spot cotton began to rise, speculators started to 
initiate short-covering action. Yet, when the market closed over the 200-day 
moving average, speculators saw that as a clarion call to actively reverse 
their bearish positions, and buy net long.  

   Thursday's strong export sales continue to under-gird prices. To that end, 
cumulative sales have reached 11.585 million bales sold, which is the strongest 
pace since 2010/2011. Interestingly, that season saw the cotton market trade 
historic highs. To date, current season sales have reached 77% of USDA's 
original forecast. This number compares to the 5-year average of 72%. 

   For Friday, support for March cotton is 69.70 cents and 69.08 cents, with 
resistance at 72.00 cents and 72.50 cents. Overnight estimated volume is 13,868 
contracts. 

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


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