Keith Brown DTN Contributing Cotton Analyst    

The cotton market was lower Wednesday due mostly to the new widespread COVID-19 breakouts in China. Bottom line, some traders are thinking China will reduce its imports of food, fuel and fiber.      

Energy-wise, strict lockdowns in Shanghai have resulted in depressed fuel demand during the month of May. In fact, the month of May led the largest annual decline in Chinese refinery production in 10 years. Last month, China processed around 12.7 million barrels per day (bpd), which was 11% less from a year ago.    

Wednesday, the Federal Reserve increased its Fed Funds (interest rates) by the somewhat expected three-quarter point hike. The financial markets had wanted to see definitive action, as it wanted the Fed to regain control of the inflation narrative. The U.S. dollar rallied after the announcement.    

Thursday morning, USDA will release its weekly export sales. While China has made a strong appearance in the data over the last few weeks, its new COVID-19 restrictions may again subdue its cotton imports.    

For Wednesday, July cotton settled at 143.18 cents, down 0.30 cent, December closed at 117.92 cents, down 2.73 cents and March 2023 finished at 113.55 cents, down 2.49 cents higher; estimated volume was 28,428 contracts.    

Keith Brown can be reached at commodityconsults@gmail.com (c) Copyright 2022 DTN, LLC. All rights reserved.