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The cotton market remains in a well defined uptrend channel off of the June 22nd lows. A turn back up in the stock market and less pressure on the grain markets this week may be the reason for the advance higher this week with December cotton moving to the highest level since May 12th. Traders indicated that the USDA supply/demand reports carried a bearish demand tilt due to downward revisions in demand from Pakistan, China and Thailand. However, while world ending stocks were revised slightly higher on the month, they are still expected to come in lower than last year and US ending stocks are also expected to decline from last year. Traders are a bit concerned with the slow monsoon rains and the impact that this may have on India production and there are also some concerns for a hot and dry trend for the weather outlook for the west Texas region. The weekly Cotton Conditions report showed 43% of the crop was rated good/excellent compared to 42% last week and 46% last year. The 10 year average for this time of year is 55%. However, Texas crop conditions declined to just 30% of the crop in good to excellent condition as compared with 32% last week and 42% as the 10-year average. Rains ahead of the current hot and dry spell were apparently not enough to improve conditions. In the 10-day forecast, there is a slight chance of some thunderstorms on Saturday and the rest of the period shows a hot and dry trend. It is expected to be 103 in Lubbock today. The forecast suggests deteriorating Texas crops ahead and could help provide underlying support. Deliverable stocks against the ICE No. 2 contract fell yesterday to 402,169 bales from the previous total of 406,569. Fears that the crops in China and India may not be in great shape this year as well helped to support the recent uptrend. The COT reports on Friday showed a fairly aggressive buying pattern from funds for the week ending July 7th. The buying trend is a short-term positive force.
TODAY’S GUIDANCE: December cotton buying support comes in at 61.35 and 60.32 with 63.75 and 67.18 as next upside technical targets.
