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DTN Closing Cotton 09/20 13:50
Cotton Ends Sharply Lower Monday
The cotton market was steeply lower Monday as economic rumblings out of
China unhinged many of the world's financial markets.
Keith Brown
DTN Contributing Cotton Analyst
The cotton market was steeply lower Monday as economic rumblings out of
China unhinged many of the world's financial markets. The Hong Kong market was
off 4%, while the Dow Jones was down some 800 points at the time of cotton's
closing. Some analysts believe this Chinese $300 billion default real estate
problem may test the soundness of its banking system.
Monday afternoon USDA will update the harvest and condition ratings of the
crop. Of course, harvest is hardly underway, but last week some 5% of the 2021
crop was gathered. Regarding the crop's condition, Texas is reputed to have a
huge crop, but the Delta and Southeast have been banged by winds and rains from
various events for many weeks. Thus, the overall good-to-excellent condition of
the nation's crop may slide. The 10-year average for this time of year stands
at 45% good to excellent.
Tuesday starts day one of a two-day meeting for the Federal Reserve. The Fed
will decide whether the U.S. economy is strong enough to withstand a reduction
in government stimulus. A "yes vote" for tapering would likely be bullish for
the dollar and bearish for commodities.
A big concern for cotton traders is the burdensome net-long position carried
by the managed-money funds. Their 10-year net-long high is 108,000 contracts,
while their most recent update had them at 91,900-plus net long. If that group
elects to downsize their bullish position, things could become hairy for the
cotton market.
For Monday, December settled at 89.02 cents, down 3.31 cents, March ended at
88.39 cents, down 3.20 cents and December 2022 ended at 80.27 cents, 1.86 cents
lower; estimated volume was 55,352 contracts.
Keith Brown can be reached at commodityconsults@gmail.com or by calling
(229) 890-7780.
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