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Trade Tensions Weigh on Cotton

Posted 08/06/2019 3:05PM CT | Tyler Herrmann

December cotton started the week pushing to new contract lows of 57.26 before rallying some to close at 58.66. Cotton’s drop lower continued this week with pressure from China’s releasing statements saying it has stopped buying U.S. agricultural products in response to additional tariffs from the U.S. The bounce off the lows show that there is perceived value down around the 57.25 to 58.00 level. This week’s crop progress report came in with a 54% good/excellent rating and although that’s down from last week’s 61%, it’s still ahead of last year at this same time when we saw only a 40% good/excellent rating. The decrease in key growing regions could be the spark needed to start a short covering rally. The 10-14 day forecast is showing higher than normal temperatures and precipitation except in west Texas where it remains dry. The December cotton market has fallen 20 cents from the mid-April high and although we could see a short-term rally on declining conditions the longer-term trend remains lower. Barring continued decreases in weather/crop conditions, Chinese demand and US/China trade tensions remain weighing on the cotton market

Cotton Dec ’19 Daily Chart
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Tyler Herrmann

Market Strategist
Tyler attended Kansas State University where he majored in Agricultural Economics. He started his career in the futures industry with an IB in North East Kansas where he worked with farmers and cattleman to hedge their risk in the market and protect profits with a variety of futures and options strategies. Most recently Tyler has joined RJO Futures as a market strategist.
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