Will Spring Planting Estimates Awaken Sleepy Cotton Market?
Today’s Spotlight Market
It appears that subdued price levels for new-crop Cotton futures may cause producers to curtail acreage this year, according to a survey by the National Cotton Council (NCC). In its annual planting estimate, the NCC projects 9.43 million acres will be planted this spring, which if accurate, would be a 15% decline from 2014.? Traders will await the ?official? estimate by the USDA in the Prospective Plantings report set for release on March 31st, which is considered the ?unofficial? start to the spring planting season by many traders.
Fundamentals
Cotton futures seem to have been a bit of a? forgotten? market for many traders the past several months, as prices moved into a consolidation phase following a steep price decline since mid-2014. However, we have started to see a bit of a bullish turn to old-crop Cotton prices the past couple of weeks, as U.S. export sales have been running ahead of expectations, which has analysts beginning to lower their estimates for old-crop ending stocks due to increased usage. However, most of the attention by the trade has turned to the 2015 marketing year and what will occur with global supply and demand.
Early estimates are for a reduction in U.S. Cotton production this season, as new-crop Cotton prices in the low to mid 60-cent range could see swing producers turn to more profitable crops this spring. However, it is the demand side of the equation that remains fluid, especially from China, which is the world?s largest consumer of Cotton. Here the early prospects for increased Chinese demand are not encouraging, as the USDA recently lowered Chinese mill usage for the 2014-15 season by 1 million bales. Potentially more discouraging was the increased estimates for Chinese ending stocks, which makes one wonder if Chinese import levels will continue apace.?????? ?
Technical Notes? -? View Today’s Chart
Looking at the daily chart for new-crop December Cotton, we notice prices starting to recover from contract lows near 61 cents, but still lagging the price rally seen in old-crop months. Prices did move above the 20-day moving average (MA), but need to rise above 70 cents to break through the 200-day MA. The 14-day RSI has rebounded from a test of oversold levels to a more neutral reading of 52.45. The high made on 12/30 of 66.04 looks to be the next major resistance level, with support continuing at the contract low of 61.28.?
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