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Like other industrial commodities, cotton has seen solid gains in the last few sessions and has worked significantly higher off of the March lows following the stock market and economic data higher. Surging money supply from last year and a massive economic stimulus plan this year may have combined to spark some moderate growth ideas for demand ahead. However, unlike other commodity markets, open interest in cotton has remained low compared with last year and even fell on Friday’s sharp rally; down 1,164 contracts to just 133,749 contracts. This compares with 271,977 open last year at this time. The cotton market pushed moderately higher on the session yesterday to close strong finding support from outside market forces and from ideas for a recovery in world demand. The surge higher in the stock market gave buyers more confidence that demand could improve in the same year that US and China production slide. After a week of better weather, a hot and dry weather outlook for Texas has traders a bit nervous. After a few more days of scattered thunder-storm activity, the forecast turns hot and dry for Lubbock Texas with temperatures near 100. Funds were noted buyers on the session yesterday with higher energy prices and a weaker dollar helping to support cotton and a wide range of other markets.
The weekly Cotton progress report showed that 77% of the crop is planted as of May 31st compared to 61% last week and 79% last year. The 10 year average for this time of year is 84%. Texas plantings jumped 20% in a week to 74% vs. 71% as the 10-year average. Georgia is just 61% planted vs. 84% as the 10-year average and this is the slowest pace on our records which go back to 1985.
TODAY’S GUIDANCE: Buying support for December cotton comes in at 60.87 and 60.17 with 65.97 and 66.74 as next upside targets.
