Cotton Prices Remain Firm Despite Increased Production

January 19, 2017 8:47AM CST

On January 12 th , the USDA published the World Agricultural Supply and Demand Estimates which showed an uptick in production and ending stocks for the US cotton crop.  Favorable yields from key growing areas in Texas helped boost domestic production figures above previous estimates, which was partially offset by an increase in exports.  Despite an initial sell-off in prices, the market has gathered itself nicely and remains in a positive trend.

Given the uptick in both domestic and world ending stocks for the 16/17 crop, market participants are now asking “Can cotton futures maintain these prices?”  Fundamentally, the market seems to be well-supplied with the recent USDA report confirming an uptick in ending stocks; however, the intermediate term bull trend in cotton remains in effect until price action deviates from the higher high, higher low market structure.  In order for the market to do this, the March’17 contract would need to produce a close below the 69.32 swing low from 12/20.  Until then, the trend remains positive for the cotton market and a retest of the August 5 th highs cannot be ruled out of the equation.

March’17 Cotton Daily Chart

Source: RJO Futures Pro

Cotton Daily

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