The proverbial rug appears to have been pulled out from under the cotton market as prices close in the red again today. Despite some dry spots in parts of West Texas, the cotton crop remains well above the 20-year average for good/excellent rating and with much higher planted acreage this year relative to last, market participants continue to press the short side of the cotton trade. However, cotton is not alone in its fall from grace as commodity prices across the board have been unusually weak over the past week or so, particularly the soft commodities. Sugar closed down over 4% today, cocoa down 3.86%, coffee down over 2% and cotton, the strongest of the bunch, closed down just 1.16% on the session.

Prospects of potential flooding could help support the cotton market in the near term as US crops near the East coast are susceptible to flooding damage stemming from tropical storms. As tropical storm Cindy continues to gain momentum, the threat of flood damage around the Gulf of Mexico region is ever-present and certainly should be taken into account.

Technically, the market remains weak as a downside break from the prior trend line, along with a confirmed breakout below the 72.15 range lows set the stage for the recent move lower. An argument could be made for potential support to be seen around 67.58 – 68.37; however, the previous swing low at roughly 65.50 coincides with a 61.8% Fibonacci retracement, making this area one to watch in the coming days.  


Dec ’17 Cotton Daily Chart

Dec '17 Cotton Daily Chart

Erik Tatje