Cotton futures rose sharply for a second session on Thursday aided by technical buying. May cotton traded more than 50 points higher by midday to above 68.60 cents a pound. Cotton technicals have turned more bullish this week, as prices broadly held minor support levels this week. Old crop May futures are testing resistance areas established by previous lows last year, while the July contract is already trading in that range. The new crop December contract is attempting an upside breakout this morning above last week’s highs.

There has been little bullish news for the cotton market aside from surging crude oil prices. The market may be building a weather story, with large moisture deficits across the Cotton Belt. The latest Drought Monitor showed that 89 percent of U.S. cotton areas are experiencing some level of drought, compared to just 33 percent a year ago.

There are chances for heavier rainfall to reach the Southeast and Delta regions next week and chip away at drought. Long-range models for this summer are mixed, with drier than average weather centered in the Plains region.

Weather concerns may warrant more premium in the cotton markets moving through the spring unless drought relief appears.

Next week’s Prospective Plantings report could offer more insight into supplies for this upcoming planting and growing season. Demand still needs to pick up for the current marketing year. The latest export sales report did show that new crop sales are now running ahead of a year ago. However, sales remain well below the five-year average due to lower Chinese demand.

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