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DTN Morning Cotton Commentary          07/19 08:14

   Cotton Higher on TGIF Recovery 

   After a week of bearish pounding by the bears, the cotton market is 
attempting a snap-up today. 

By Keith Brown
DTN Cotton Correspondent

   After a week of bearish pounding by the bears, the cotton market is 
attempting a snap-up today. This week saw the market down some 400 points from 
its Friday close of last week, resulting in an even worse oversold condition. 
Open interest, the total number of all longs and shorts, is at its highest 
level since June 14. This move possibly reflects the expanding net-short 
position held by bearish speculators. As it stands, speculators have been and 
are still record net-short, and seemingly padding their position.  

   The cotton market is suffering from a cluster of bearish fundamentals, two 
of which are lack of a trade deal with China, and a robust U.S. Crop in the 
making. To the former, just this week President Trump tweeted the trade talks 
"have a long way to go". This statement was in direct contrast to previous 
predictions about a speedy trade compromise. Currently, the talks continue to 
drag on, and some U.S. officials seem to be prepping the country for the 
possibly that trade deal is unlikely to happen this year. 

   Regarding the U.S. 2019 crop, it seems to be swelling. USDA's last report 
pegged it at 22 million bales, a 14-year high. Additionally, the current crop 
is rated 56% good/excellent. Although Texas has been dry of late, the 6 to 10 
day forecast for the Lone Star State calls for above normal precipitation for 
west Texas. 

   As of July 11, cumulative sales stand at 27.4% of USDA's 2019/2020 
projection. The five-year average for this time of year is 25%. Recently, U.S. 
sales have been off as China is a non-participant in the U.S. market, 
continuing to conduct domestic auctions for strategic reserves as a way to 
avoid contact with the U.S. market. 

   For today, support for December cotton is yesterday's low of 61.66 cents. 
Close-in resistance is at 62.70 cents and 63.20 cents. Overnight estimated 
volume is 3,850 contracts. 

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


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