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DTN Cotton Close

Cotton Trades Mixed Tuesday

May 30, 2023

The cotton market was all over the place Tuesday, as spot July continued to experience speculative short covering, while December may have seen a bit of producer hedging.

The cotton market was all over the place Tuesday, as spot July continued to experience speculative short covering, while December may have seen a bit of producer hedging. Specifically, the managed-money funds have reversed their steep net short position to one of being slightly long. New crop was weaker in the face of improving Texas weather forecasts. 

Tuesday afternoon, USDA will issue its weekly crop progress report. The 2023 crop is pretty much on historical pace, despite the notion there are potentially fewer acres for 2023.

Friday's Commitments of Traders report showed that the managed money funds were net buyers of some 20,000 contracts last week for the period ending May 23. As previously stated, that massive buying reversed them to a net long status of nearly 8,000 contracts. 

Last week's U.S. Drought Monitor did show significant improvement in dry conditions areas in the Southwest. Still, even with the recent rain patterns, there remains swaths of extreme (D3) to exceptional drought (D4) parts remaining Texas and Oklahoma.

Currently, the one- to five-day weather forecast indicates rain, possibly up to 2.5 inches for the Texas Panhandle. The extended six- to 10- and the eight- to 14-day outlooks promote above-normal chances of rainfall for the region, along with below-normal temperatures. 

There are 17 days till the expiration of July options. The contract will enter delivery on June 26.

Crude oil prices fell by about 4% Tuesday as concerns whether the U.S. Congress will pass the debt ceiling agreement, plus mixed signals from major energy producers ahead of the OPEC's meeting this weekend.

Some of the hard-right Freedom Caucus lawmakers said they might oppose a deal to raise the debt ceiling in the United States. It must pass a divided U.S. Congress before June 5, the day the Treasury Department says the country will not be able to meet its financial obligations, which could disrupt financial markets.

Tuesday, July settled at 83.99 cents, up 0.64 cent and December 2023 ended at 80.21 cents, 0.33 cent lower. Estimated volume was 53,864 contracts.

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