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The market has managed to absorb the improved weather for the West Texas cotton crop from last week and we would not be surprised if crop conditions improve into next week. After a good rain into the weekend, it will be a long time until the crop needs more rain and the hot and sunny forecast is considered somewhat negative. The market seemed expensive on the run to nearly 64 cents in May but the set-back to near 55 cents may have attracted some new business. The weakness in the dollar yesterday was seen as a potential positive force but the market has followed the stock market more than anything else recently. December cotton inched lower after choppy and two-sided trade early yesterday but managed to close strong. A lack of direction from the stock market and continued talk that last week’s rains had a significant and positive impact on the crop in Texas helped to limit the advance. There was some buying interest near 55.00 which is a half way back support point of the March-May rally but a sluggish tone to the demand outlook helped to limit the buying support. The collapse in the US dollar helped provide underlying support. A continued slower demand outlook could push December down to near 53.00 before finding the next near-term support. The Texas crop was rated only 30% good/excellent as compared with 33% last week and 40% as the 10-year average. A higher percentage of the crop is from Texas this year as other delta and Deep South producers switched more land to other crops this year. Traders await next week’s update from the USDA on planted acreage and most seem to be looking for a further revision lower.
TODAY’S GUIDANCE: Key support for December cotton comes in at 55.00 and 52.95 with 57.06 and 58.12 resistance.
