The Cotton Market suffered triple-digit losses Wednesday as fears over potential Chinese response heighten. Tuesday afternoon, the Trump Administration initiated another round of potential tariffs to the tune of $200 billion on an expanded list of Chinese imports.
Our understanding is there has to be public comments all the way through the month of August before actual implementation would begin. Also, these latest proposed tariffs would be a 10% levy instead of the heretofore 25% tax. At any rate, the entirety of the financial and commodities markets were lower to sharply lower Wednesday.
December Cotton settled at 84.75 cents, down 166 points, while next-in-line March Cotton closed at 84.47 cents, off 155 points. Red December Cotton (2019) finished at 78.50 cents down 140 points. Despite the potential for a financial bloodbath, total volume was not commensurate with the decline. Estimated volume today was roughly 16,000 contracts.
The U.S. Dollar was demonstratively higher Wednesday as the collapse in the commodities resulted in a flight-to-quality buying by global investors. Interestingly, there has been no word of actual Chinese retaliation, only public condemnation over the U.S. action.
Thursday, the cotton market will receive the latest informational take on the 2018 crop from USDA. At 8:30 a.m., weekly sales and exports numbers will be issued. The trade is hoping there will be no Chinese cancellations. Regarding the supply-demand report, we are looking for another reduction in global carryout.