Cotton Bears Take A Breather As Prices Consolidate Above Lows
Today’s Spotlight Market
The October USDA crop production report forecasted U.S. Cotton production at 16.3 million bales, which was down 2% from last month?s estimate, but still over 26% last year?s total. The International Cotton Advisory Committee lowered its forecast for global Cotton prices to 6 year lows, as an expected 1.8 million metric ton global production surplus and huge Chinese Cotton inventories are expected to suppress Cotton prices as we move into 2015.
Fundamentals
The bear market for Cotton prices has stalled of late and the market has moved into a consolidation phase. Lead month December Cotton has held above the 60 cent per pound level, despite bearish demand fundamentals out of China and favorable harvest weather in the U.S.? 29% of the U.S. Cotton crop has been harvested so far, which is slightly below the 10-year average of close to 35% completed. However, weather forecasts are calling for nearly ideal weather conditions in the heart of the ?Cotton belt? for the last part of October which should allow producers to get back into the fields. Weaker Chinese Cotton demand, combined with a strengthening U.S. Dollar could greatly curtail U.S. Cotton exports in 2015 with an announcement earlier this month that China would restrict Cotton import totals adding to the bearish Cotton fundamentals as China is both the largest exporter and consumer of Cotton globally.
Technical Notes? -? View Today’s Chart
Looking at the daily chart for December Cotton, we notice prices trying to from a base as prices have been in a consolidation phase since August. The market has traded on both sides of the 20-day moving average (MA) of late but remains over 10 cents per pound below the longer-term 200-day MA.? The 14-day RSI has moved off of oversold levels with a current reading of 44.69. The recent low at 60.83 remains support for the December contract, with resistance seen at 68.48.
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