Is the demand for cotton seriously underestimated?

November 27, 2017 01:14 PM


General Comments: Cotton was higher again and made new highs for the move on Friday. The esport sazles report was strong and encouraged buying. Trends turned up on the charts last week and it looks like a big low has been completed.  The market met some initial swing targets on Friday. Speculators are already long, and mills have been forced to buy to cover open on call positions in the cash market. The futures market is watching the harvest roll along and is debating the demand for U.S. and world cotton. Some traders say that USDA is seriously underestimating demand for the fiber, while the others look to the high USDA ending stocks estimates and suggest that any demand can be easily met. Farmers are reported to be quiet sellers right now. Harvest conditions are good in just about all areas. 

Overnight News: The Delta and the Southeast should get showers over the middle of the week. Temperatures should be near to above normal through tomorrow, then near to below normal. Texas will see mostly dry conditions. Temperatures will be above normal early in the week and below normal late in the week. The USDA average price is now 69.74 ct/lb. ICE said that certified stocks are now 47,951 bales, from 47,951 bales yesterday.  

Chart Trends: Trends in cotton are up with objectives of 7200 and 7500 March. Support is at 7080, 6960, and 6900 March, with resistance of 7210, 7320, and 7380 March


General Comments:  FCOJ closed a little lower on Friday and was slightly lower for the week. The harvest is progressing well and more fruit is starting to go 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 what is left as cleanup from the hurricane is about over now. The emphasis is on the fresh fruit market now, with processors mostly getting packing house eliminations at this time. However, processors are taking deliveries from producers now as well.

Overnight News: Florida should get mostly dry weather and near to above normal normal temperatures. Scattered showers are expected this weekend. Brazil should get mostly dry conditions and near to above normal temperatures. Some showers are possible this weekend. ICE said that nine notices were posted for delivery today and that total deliveries for the month are now 38 contracts. 

Chart Trends: Trends in FCOJ are up with objectives of 171.00 January. Support is at 163.00, 160.00, and 157.00 January, with resistance at 169.00, 170.00, and 175.00 January.

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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.