"Cotton’s 2020 year begins with a bullish tone with strong upside fundamental potential compared to 2019.  The little bull has its legs and has demonstrated some flair with a current seven month high in prices.  It is time to continue north to higher prices.  Let’s review some of the Bullish and Bearish factors facing 2020.  Granted, I will miss some," said O.A. Cleveland in his weekly cotton report.

Here's his outlook for the coming year:

BULLISH

•  Nearby prices at 70 cent level after falling into the 50’s


•  The tendency of prices to move to 75 cents after a bearish year


•  Increasing world consumption amid world economic rebirth


•  Declining world carryover and declining U.S. carryover


•  Declining world plantings and slightly lower world production


•  Exceptionally robust U.S. economy and strong consumer spending


•  Very active increase in speculative market purchases


•  Bullish market technical projecting challenge of 75 cents


•  On-Call sales (March/May/July) out distancing On-Call purchases


•  Strong December cash sales, removing cotton from grower hands


•  High yielding and increased lint quality from seed companies


•  U.S. planted acreage falling 8-12%


•  Export sales pace well exceeds USDA sales estimate of 16.5 million


•  Tariff resolutions favors increased exports to China/limits cancellations

BEARISH

•  Declining U.S. domestic mill use


•  Market analyst’s perception that the U.S.-China tariff hurts U.S cotton


•  U.S. acreage lower, but still near 12 million


•  Weekly U.S. export shipments must average 385,000 bales to reach USDA projection


•  U.S. carryover stocks still 4.8-5.3 million bales


•  Unchallenged entry into U.S. of Chinese textile goods


•  Chinese overproduction due to unchallenged heavily subsidized price paid to growers


•  Potential for increased U.S export cancellations without tariff resolution


 

The favorable technical and fundamental factors favor higher prices as the factors indicate.  Both old crop and new crop contracts favor a breach of 75 cents.  Prices for both market years have to potential to move to 77 cents or above.