By Todd Hultman, DTN Lead Analyst 

May cotton closed up 1.02 cents Wednesday at a new contract high of 93.69 cents, continuing to charge higher in the face of growing demand and an improving world economy. It also doesn’t hurt that nearly all other commodities were higher Wednesday and their popularity appears to be growing, while the Federal Reserve is committed to keeping the federal funds target near zero. Fed Chairman Jerome Powell reinforced the Fed’s commitment to low interest rates in front of Congress this week, saying he is not yet concerned about inflation.

Pertaining more to cotton, U.S. demand is doing very well in 2020-21 with exports up 19% from a year ago and showing benefit from China’s growing economy. USDA has yet to recognize the export increase on its U.S. balance sheet so there is room for its 4.30 million bale ending stocks estimate to go lower. USDA’s next weekly export sales report is due out Thursday morning at 7:30 a.m. CST.

For the new-crop season, USDA estimates another reduction in U.S. ending cotton stocks of a half-million bales. With prices of corn, soybeans, sorghum and winter wheat at profitable levels, there is little room for an increase in cotton acres in 2021 and that should help support prices in the new season.

From a technical view, May cotton is similar to soybeans in that it has only had one close below the 30-day average since the uptrend began in late July. The 30-day average is currently at 85.33 cents and rising, well below Wednesday’s close of 9x. Resistance is likely waiting at $1.00 where spot prices have not been since 2011.

Dow Jones reported the Cotlook ‘A’ Index was up 1.75 cents Tuesday, Feb. 23, at 97.35 cents per pound. According to ICE, there were 8 deliveries early Wednesday, bringing the total to 41 for the March contract. Certified cotton stocks totaled 100,326 on Feb. 23, the same as the previous day.