Mumbai, 27 May (Commoditiescontrol): ICE cotton prices experienced a significant uptick during the week ended May 24, with July futures rising by 463 points, or 6.1%, since last Friday. The December new crop also saw an increase, up 304 points or 4.05% over the week. However, the price gain is not convinving engouh, for speculators/traders to open fresh long bets. This fact, is reflected in CFTC report, and simply suggest that some late-week short covering likely contributing to the price surge.
Basically, the firm trend in cotton futures were largely led by strong U.S. exports ssale and the report card of planting progress. According to the U.S. Department's (USDA) National Agricultural Statistics Service (NASS) report, 44% of the U.S. cotton crop had been planted by Sunday, May 19, marking an 11% increase from the previous week. This planting pace aligns with the five-year average and is slightly ahead of last year's pace, although Texas and Georgia are lagging slightly behind their five-year averages.
The USDA's Export Sales report revealed a 29.71% week-over-week increase in old crop sales, amounting to 202,935 running bales (RB) for the week ending May 16. In contrast, new crop sales were relatively modest, totaling 47,870 RB. Export shipments reached a three-week low at 204,053 RB.
Additional market data showed that The Seam reported sales of 13,216 bales on May 22 at an average price of 79.63 cents per pound. ICE certified cotton stocks rose by 1,283 bales on May 23, reaching 192,805 bales. The Cotlook A Index increased by 300 points on May 23 to 88.60 cents per pound. The Adjusted World Price (AWP) for the next week was up 62 points to 60.08 cents per pound as of Thursday.
On the global front, the USDA's World Agricultural Outlook Board (WAOB) revised its carryout estimates for the 2023/24 cotton season down by 2.6 million bales to 80.48 million, due to a smaller carry-in. Conversely, it projected an increase in 2024/25 ending stocks by 2.53 million bales to 83.01 million.
Another important aspect to consider here is the Cotton on-call report, which provides a preview on at what price the mills are locking their cotton purchase. The CFTC’s Cotton On-Call report indicated a reduction in unfixed call sales for July by 2,283 contracts, totaling 13,769 as of May 17. That's slightly bullish for the market, which was depressed by the expectation of demand slowdown.
Speculators have used this opportunity to their best of ability. Large managed money speculators in cotton futures and options expanded their short positions by 8,058 contracts as of May 21. By the end of the reporting period on Tuesday, their net short position had grown to 23,372 contracts, marking the highest level in nearly 14 months.
Traders are closely monitoring technical support levels for the July cotton contract at 79.31 and 78.10 cents, with resistance levels at 81.95 and 83.38 cents.
As the cotton market navigates through fluctuating dynamics, the recent price surge underscores the impact of robust U.S. export sales and steady planting progress. However, the cautious approach by speculators and the complex interplay of global supply and demand continue to create a volatile environment. Traders will need to stay vigilant, closely watching technical indicators and market reports to adapt to the evolving landscape.
(By Commoditiescontrol Bureau: 09820130172)
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