Government Subsides Boost China’s Cotton Futures

Certain cotton farmers in China are being subsidized by their government by a higher than expected amount.  Cotton futures there have reportedly soared the most in seven months as the world’s largest consumer of cotton resets the reference price for that crop.
 
Cotton futures on the Zhengzhou Commodity Exchange rose as much as 3.6% – the biggest gain for cotton since last summer.  With the government setting the reference price to 19.8K yuan per ton, and the current price for cotton futures 16.1K per ton, I would say cotton futures has more to rise there.

Expectations are for a bullish USDA report for cotton this week. Nothing major has changed fundamentally in the cotton (futures) market. Texas did see some rainfall overnight, although reports are that it didn’t amount to much,” stated Kevin Craney, Director of Managed Futures at RJO Futures in Chicago, regarding the current cotton futures situation.  Craney added,Therefore, this will continue to support the (cotton futures) market as we go into the report this week.”

The trend for cotton futures remains up, despite its inability to hold the late March gains.  I am long cotton futures but feel it may be at a crossroads.

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