Cotton futures extended recent gains this week, as prices moved further from their contract lows posted earlier this month. December cotton traded 49 points higher on Tuesday to close at 65.05 cents a pound, the highest close since Oct. 6. Traders exiting short positions have likely been a major driver of higher prices. There seems to be an unwillingness to be short in the market amid a potential deal between the U.S. and China. 

Technically, futures climbing back above the old “Liberation Day” low of 64.24 is positive. However, prices could continue to struggle near the 65.87 level, which had served as previous support before seeking out new contract lows.

President Trump and President Xi are set to meet at the APEC meeting on Thursday. White House officials and counterparts in Beijing have already expressed a general consensus on trade negotiations, which could be finalized this week. 

Cotton has gotten less attention than other commodities amid the latest tit-for-tat between the U.S. and China. Unfortunately, global cotton demand has been weaker than soybeans. The likelihood of China stepping in with large U.S. cotton purchases is lower than other commodities due to weak economic signals.

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PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. FUTURES TRADING INVOLVES SUBSTANTIAL RISK AND IS NOT SUITABLE FOR ALL INVESTORS.