Cotton futures down on favourable Texas planting, demand woes
Cotton prices settled lower on Tuesday as planting kept pace in South and West Texas, the largest cotton-producing state, while concerns of demand meeting abundant production in the United States kept investors at bay. Cotton contracts for July settled down 0.59 cent, or 0.87%, at 67.32 cents per lb.
It traded within a range of 67.01 and 68.24 cents a lb. "The weather has been drier in south and west Texas where planting conditions have been really good," said Jack Scoville, vice president at Price Futures Group in Chicago. "Between prospects of good planting pace in cotton along with demand concerns, the market is under pressure. We are not doing business with some of the larger buyers in the world, i.e. China."
The World Agriculture Supply and Demand Estimates (WASDE) last week predicted cotton production in the United States would climb to 22 million 480-pound bales for 2019/20, but cotton participants are concerned where this extra production will find demand. Further adding to worries, trade negotiations between the United States and China looked bleak.
Escalating trade tensions between the world's two largest economies have ruffled feathers across markets since beginning over a year ago, and pushed the cotton contract to three-year lows last week. "There is no one expecting cotton prices to drop further from where it already has. Maybe we can go as far down as 60 cents, but we don't have to," Scoville added.
Total futures market volume fell by 5,198 to 23,457 lots. Data showed total open interest fell 3,955 to 214,363 contracts in the previous session. Certificated cotton stocks deliverable as of May 20 totalled 73,235 480-lb bales, down from 81,507 in the previous session.