Cotton futures shrugged overnight and into Tuesday morning amid technical buying. March cotton traded 100 points higher to 65.76 cents a pound by midday. Speculative short-covering likely drove the buying overnight after prices pushed above the Nov. 28 high of 64.95 cents. The level had capped gains last week due to strong bearish pressure.

The latest Commitment of Traders data showed that commercial traders were net sellers of cotton the last week of December. Traders had been heavy sellers on a net basis since mid-October.

The commercial selling could trigger additional speculative short-covering that could help prices peak above resistance levels. Fundamentally, the U.S. and global supply and demand outlooks are bearish. Moving through the winter, the market will continue to sort out planting expectations for the upcoming season in the U.S., India, and Brazil.

China finished its cotton harvest this fall, producing a record 6.17 million metric tons (MMT) due to higher seedings and great yields, according to the National Bureau of Statistics. That has led to reduced imports, which have particularly hurt U.S. demand.

In the U.S., the cotton belt has seen increased moisture deficits over the past month amid a lack of rainfall in the region. The latest Drought Monitor showed that 62 percent of cotton areas are under some form of drought, compared to just 20 percent last year.

“Sunbelt dryness needs to be watched through the remainder of winter,” Eric Snodgrass with Nutrien Ag Solutions said in a weekly report.

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