Cotton futures jumped amid USDA WASDE’s output cut forecast

On Wednesday, cotton futures price increased amid low supply and production estimates from USDA’s latest WASDE report released earlier this week.

At the Asian afternoon session, the price of cotton contracts for December delivery was advancing by 0.86% to $103.20 per metric ton.

The United States Department of Agriculture’s monthly World Agricultural Supply and Demand estimates released its cotton forecast for the 2022/23 marketing year that started on August 01.

The USDA revised its yield projections to 843 pounds per acre from 846 pounds per acre.

Besides, the agency expects cotton production to hit 13.83 million 480-pound bales, which is a plunge of 21.00% compared to last year when it reached 17.52 million 480-pound bales.

Consequently, the soft commodity’s cotton supply is projected to hit 17.59 million 408-pound bales, down by roughly 15.00% from its total supply in 2021, with carry-over stock of 3.75 million 480-pound bales.

Subsequently, USDA also estimated that cotton exports will rise by 600,0000 480-pound bales from August to September, registering 12.60 million 480-pound bales.

The modification in supply and demand pushed the ending stocks to 2.70 million 480-pound bales, lower by 28.00% from the prior year.

Technical Analysis

On the technical side, the December cotton futures traversed the support zone of $101.72 and the resistance level of $103.24 on Tuesday.

The contract also crossed through the Fibonacci retracement swing low of $102.97, $103.04, and $103.08 as well as a swing high of $103.22, $103.26, and $103.33. Its pivot point was $103.15.

Also, it is traveling across the 10-day simple moving average of $102.76 and the 10-day exponential moving average of $102.84, which implies a buy position.

Furthermore, cotton futures surpassed the Stochastic oscillator level of 70.00 and is now sitting at 73.21.