Cotton Push Higher Continuing on Friday AM Trade

Cotton futures are extending gains, up 38-47 points Friday morning, following Thursday's rise, despite significantly weaker export sales data showing total sales at their lowest since September and shipments at their smallest since mid-January. This upward price momentum, which also sees the Cotlook A Index and USDA AWP increasing, suggests market strength is overriding current demand indicators, possibly influenced by broader market factors like a weaker dollar and rising crude oil.

Analysis

Cotton futures are demonstrating notable price strength, with contracts rising between 38 and 47 points in early Friday trading, extending gains from the previous session. This upward momentum is occurring despite significantly bearish fundamental data, specifically from the weekly Export Sales report. The report indicated that total sales for both current and new crop marketing years have fallen to their lowest levels since September, and shipments of 184,521 RB were the smallest total since mid-January. The rally appears disconnected from this immediate demand picture, suggesting other factors are at play. Supporting the price increase are other benchmarks like the Cotlook A Index, which rose 25 points to 78.65, and the USDA's Adjusted World Price, which climbed 15 points. The price action may be drawing support from broader market dynamics mentioned in the report, including a weaker U.S. dollar index and a modest increase in crude oil prices, which could be overriding the weak export figures for now. Meanwhile, ICE certified stocks remain steady, indicating inventory levels are not a primary driver of the recent volatility.

Key Decisions for Investors

• Investors should be cautious of the current rally, as it is directly contradicted by weak export sales and shipment data, suggesting a potential disconnect between price momentum and physical demand.
• Closely monitor upcoming weekly Export Sales reports for any signs of a demand recovery; a continuation of poor figures could quickly undermine the current price strength.
• Pay attention to macroeconomic indicators such as the U.S. dollar index and crude oil prices, as their movements appear to be a key driver of cotton prices in the absence of strong fundamental support.