Keith Brown DTN Contributing Cotton Analyst
The cotton market, both old and new crops, took out their respective weekly highs Friday. The somewhat surprising rally has for the most part been rooted in the charts. That is, technical buying from certain sold-short traders, and new buying from others, is undergirding the market. It was one week ago today that USDA issued friendly domestic supply-demand numbers.
This afternoon at 4 p.m. EDT, the CFTC will issue an updated Commitments of Traders report. Over the past few weeks, the net-short position has been methodically diminishing. However, Friday's numbers will be as of Tuesday's close; and given this week's rally, their position may be all the more less.
The weekly U.S. Drought Monitor, updated Thursday, did reveal some improving pockets in West Texas. In some areas the D3 reading of extreme drought has mitigated to a D2 level of severe drought conditions. However, a large swath of Oklahoma and the Panhandle remain under extreme to exceptional drought (D4).
The 1- to 5- day forecast calls for rains of up to two inches across portions of Oklahoma, with smaller amounts (0.25-0.75 inches) for West Texas. Meanwhile, the extended 6- to 10- and the 8- to 14-day outlooks indicate above-normal chances of rain in both locales.
There are 28 days till the expiration of July options. The contract will enter delivery on June 26.
John Deere upped its profit forecast for the year, sending its shares higher in Friday's trade. However, once a conference call from the CFO revealed higher inventories, shares fell. There are concerns that demand from farmers is slowing. Yet Deere said it's not seeing weaker demand, and defended the higher inventory levels, saying it's a benefit for its dealers as it provides them with more time to deliver machines and to facilitate used trade-ins.
For the week, July cotton was up 6.19 cents, for the month, it was plus 5.92 cents, and thus far for the year, July is higher 3.34.
Friday, July settled at 86.72 cents up .06 and December 2023 ended at 83.89, .17 higher. Friday's estimated volume was 43,020 contracts.
Keith Brown can be reached at commodityconsults@gmail.com
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