Cotton: Lower Monday, Lower Tuesday

Cotton prices fall as Fed rate hike fears, weak crop ratings, and China losses weigh.

By Keith Brown DTN Contributing Cotton Analyst

After its near four-cent “spanking” since last Friday, the cotton market continues to spill. No doubt, the market is oversold, on a very short-term basis, but also traders are assessing the crop progress data, as well as waiting on the outcome of this week’s meeting of the Federal Reserve.

USDA issued its crop progress data yesterday. The report showed the 2026 crop being rated 36% good/excellent. That number was slightly higher than the previous 34% reading, but still down from 52% a year ago. The five-year average for this date is 44% good/excellent. Texas was 18% good/excellent, up from 16% last week, but off from 47% a year ago. Her five-year average stands at 32%. The report also showed 57% of the US crop had bolls open, up from 40% the previous week. The five-year average is 48% open. Roughly, 8% of the crop is harvested, which is right on the average pace.

Today the Federal Reserve meets to discuss domestic interest rates. Recent jobs data and inflation reports, plus high-flying crude oil, has some traders expecting a quarter-point hike in rates. According to the CME Marketwatch tool, there is a ninety-percent chance for a hike on Wednesday.

China’s ZCE cotton futures had a fourth consecutive lower session. We note its January contract has suffered a nine-session net drop of 5.2%. For comparison, the last nine sessions of the ICE December contract shows a net loss of 9.2%. In addition, China’s State Reserve auction returned to another sell-out event. Today marked the 40th sell-out out of 41 total auctions, for a total purchase rate of 99.9%. Roughly speaking, total sales have amounted to 1,445,457 bales.

Crude Oil is sharply higher today amid worries over escalating Iran-US tensions. Recent strikes by the Houthis on a Saudi pipeline, and attacks by Iran on ships in the Gulf continue to ramp crude prices. President Trump said on Sunday that the US will continue its campaign against Iran and possibly take control of its oil.

For today close-in support for December Cotton stands at 8350 and 8300, with resistance around 8580 and 8655. This morning’s estimated volume is 16,245 contracts.

Keith Brown can be reached at commodityconsults@gmail.com or by calling (229) 890-7780.