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The market seems to have the longer-term fundamentals to move to a higher price level but lingering demand concerns due to high unemployment and the potential for harvest pressures in the weeks just ahead are factors which could keep the market choppy over the short-term. Traders do not seem too concerned with the slow pace of maturity of the crop as we approach a key production and supply/demand report on Friday. However, weather will become a more important factor over the near-term as bolls are now open for most of the crop and too much rain could hurt yield and mostly quality of the crop. The weekly crop progress report showed that only 10% of the crop is harvested compared to 8% last week and 15% last year. The 10 year average for this time of year is 24% and this is the latest progress for this time of the year in the 24 years of data which we follow. The previous low was 14% in 1989. The weekly Cotton Conditions report showed 47% was rated good/excellent compared to 49% last week and 50% last year. The 10 year average for this time of year is 52%. Bolls are now open on 68% of the crop from 77% average. The Georgia crop is just 2% harvested from 14% as the 10-year average. December cotton closed moderately higher on the session yesterday but remained inside of Friday’s range. Weakness in the US dollar, a strong US stock market and ideas that world production estimates will be revised lower by the USDA for Friday’s Crop Production and Supply/demand report helped to support. Traders see a 1-2 million bale revision lower in production with reductions expected for China and maybe Pakistan. If we knock off 1.5 million bales in production for the report and hold demand steady with last month, the world stocks/usage could dip to 48.6% as compared with 55.5% last year. The delta and southeast look to get hit with scattered rains and storms into the weekend which might provide some underlying support.
TODAY’S GUIDANCE: The short-term trend is a bit uncertain but the longer-term trend looks to be higher. Resistance for December cotton comes in at 62.18 with support at 60.22. March cotton support comes is 62.68 with 71.05 as upside target.