Commodity-market-review

Weekly cotton market review 11/09/2020.

ICEUS:CT1!   COTTON NO. 2 FUTURES
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TECHNICAL ANALYSIS OF COTTON

Last week, ICE U.S. cotton futures closed lower at $68.62 cents per pound.
The pandemic continues unabated, we have just surpassed 50 million cases worldwide, with more than 1.250 million deaths . Faced with the 2nd wave, Europe is confining itself or imposing curfews. The United States is the first country to exceed 100,000 new cases in one day. Joe Biden wants to set up a crisis unit. In Europe, many non-essential businesses are closed such as bars and restaurants.
Total cash transactions are 317,261 bullets, 16,224 more this week compared to 17,291 the week before.
Hurricanes Delta and then Zeta have hit the Delta and Southeast region in recent weeks.
-In the Southeast, harvesting has resumed, dry weather has allowed the soil to dry and support heavy equipment. Following the passage of Zeta, some areas were left without electricity at the beginning of the week, and boll rot and reduced quality were observed. The harvest is completed between 25 and 40% depending on the state.
-In the Delta, soft soils delayed the harvest. Producers are concerned about the decline in quality and yield. Harvest is 77-91% complete in the South Delta and 52-75% complete in the North Delta, and only 32% complete in Missouri.
This week it is the Eta storm that will hit Florida and bring rain to the southeast.
ICE U.S. cotton stocks are up to 6,6598 bales, above the five-year average.
In the United States, Joe Biden will be sworn in on January 20, 2021. The Senate remains Republican for the time being, but there will be a second round in Georgia on January 5. If the Democrats win both seats, it would bring the distribution to 50-50 seats, and Vice President Kamala Harris could constitutionally break the tie. In the absence of a majority in the Senate, voting on a plan to support the U.S. economy would be made more difficult. This leaves uncertainty as to the timing and amount of the plan. Last week the Fed reaffirmed its willingness to support the US economy and is ready to "increase its firepower" if necessary. The dollar fell sharply, with the DXY dropping from over 94 at the beginning of last week to close Friday at 92.236, a drop that benefited all dollar-denominated commodities .

WEATHER IN THE UNITED STATES

The hurricane season in the North Atlantic is officially underway until November 30, and the U.S. cotton harvest is still underway. Rainfall in October was higher than normal, with over 200 mm falling in some areas of the southeast and delta regions particularly hard hit by hurricanes Delta and Zeta. Last week the American cotton belt was particularly dry. Next week it is storm Eta that will be to watch out for as it will hit Florida and bring heavy rains to the southeast. Cotton is particularly sensitive to rainfall at this time when the boll caps are open. Moisture causes rot and discoloration of the cotton fiber.

ICE US CERTIFIED COTTON STOCKS

ICE cotton stocks rose sharply to 6,6598 bales from 45,898 bales last week. Stocks are above the five-year average for the same period.

THE DOLLAR

The DXY index representing the Dollar against a basket of foreign currencies closed last week, down sharply at 92.236. The U.S. elections will continue to bring volatility to the currency market. Joe Biden will be sworn in January 20, the Senate remains Republican for now, but a second round will be needed in Georgia. Therefore, there is still a lot of uncertainty about the size and date of the famous plan to support the American economy.
Last week's statements by the FED certainly weighed heavily on the dollar. The FED announced that it could increase "its firepower" if necessary. Forex traders are therefore anticipating an increase in the money supply.
On Sunday, the United States experienced a record covid-19 for the 4th consecutive day, and even though the news was dominated by the elections, the pandemic could be remembered by investors if the US faces a 2nd wave similar to the one hitting Europe. A return of the dollar as a safe haven is not a possibility to be ignored. The dollar has a strong influence on the price of raw materials, and it will be very difficult to predict its evolution in the coming months.
A low dollar is generally favorable to the dollar-denominated commodity markets.

COMMITMENTS OF TRADERS

The weekly COT ( Commitments of Traders ) report of the Commodity Futures Trading Commission (CFTC) shows all the positions opened by all market participants. The COT report is published on Friday, and reflects the open positions on Tuesday of the same week. It shows the position of commercial traders (producers, commodity buyers, ...) but also non-commercial (speculators).
The net positions of speculators on the futures markets are particularly interesting to observe.
The speculative net position on the cotton futures markets is down this week to 66.191 K instead of 74.433 K.

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