Expanding Glut Extends Cotton Futures Low

A record amount of cotton is reportedly being hoarded by China in an attempt to aid their farmers as global production is said to be exceeding demand for a fourth year in a row.  Should the economy slow down for that nation, and they decide to sell their inventory, it can only increase the risk of a “supply surge” ultimately leading to an all out bear market.

The USDA estimates China having as much as 12.7M metric tons of cotton in inventory buy the end of next July, which is 62% of the global total – enough to craft 71B t-shirts!  A number of analysts predict cotton prices to drop almost 9% to 0.695 cents a pound in a years time.
Cotton markets are nervous over the potential release of Chinese stocks which would likely curb the need for US imports and increase available stocks not only in China but globally.  Even though cotton prices have dropped for 12 straight sessions, the cotton market does not appear to have a bottom in sight,” says Christian Moreno, a commodities broker for HighGround Trading Group in Chicago, regarding the current cotton futures situation.  Moreno added,Technically, the RSI for cotton (futures) is probing into oversold territory, however one should take note that the last time cotton held this RSI level was early May of this year and the oversold condition held until the 1st week of June before the market began to rally.”

Cotton futures trend is completely down with no bottom yet in sight.  I am looking for the next opportunity to short cotton futures on any pull-back. 


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