Mumbai, 3 Jun (Commoditiescontrol): Cotton markets experienced significant weakness during the week ending May 31st, driven by poor export sales and beneficial rains in key growing regions. Despite an above-average initial planting record pulling down prices, traders resorting to the short covering helped limit the decline.
ICE cotton futures fell for the third consecutive day on Friday, marking their worst week in six weeks, influenced by demand concerns and rainfall in major cotton areas. The July futures contract on ICE cotton dropped 161 points, closing at 76.15 cents per pound. December contracts fell 140 points to 75.11 cents, and the March contract decreased 150 points to 76.79 cents. The drop into the 70-cent range led to a price limit reduction to 3 cents per pound.
Cotton prices ended the week and month lower, impacted by weak shipment data in the latest Export Sales report. External factors also contributed, including a 74-cent drop in crude oil prices per barrel and an 88-point decline in the US dollar index. Export Sales data showed a 9.71% increase in cotton bookings for the week of May 23, reaching 222,632 RB, a three-week high, with China purchasing 191,900 RB. New crop sales rose by 63.15% to 78,102 RB, though shipments hit an 18-week low at 172,195 RB, with exports to China at their lowest since November, at 52,540 RB.
The USDA's National Agricultural Statistics Service (NASS) reported that 59% of the cotton crop was planted by Sunday, 2% ahead of average, though only 4% had squared, 1% behind normal. The initial condition rating was 60% good/excellent, the best since 2017, with Texas and Georgia reporting strong starts.
Globally, the USDA's World Agricultural Outlook Board (WAOB) reduced its carryout estimates for the 2023/24 cotton season 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. ICE certified cotton stocks fell by 10,033 bales on May 30, to 123,415 bales. The Cotlook A Index dropped 120 points to 90.10 cents/lb on May 30, while the USDA Average World Price (AWP) rose by 429 points to 64.37 cents/lb, effective until next Thursday.
The CFTC's Cotton On-Call report showed a 3,331 contract drop in unfixed call sales as of May 24, totaling 10,438. The total unfixed call sales position increased by 86 contracts to 50,994, while unfixed call purchases rose by 2,952 contracts to 80,831. Commitment of Traders data indicated short covering for the week ending May 28, with specs reducing their net short position by 10,607 contracts, bringing it to 12,765 contracts.
As the cotton market navigates the interplay of export sales and favorable weather conditions, volatility remains high. With strong demand from China and beneficial rains in key growing regions, traders are carefully monitoring the balance between supply and demand. The USDA's revised carryout estimates and favorable crop condition ratings suggest potential stability in the coming weeks, yet external economic factors and fluctuating global conditions could influence market dynamics.
Technical support levels for the July cotton contract are closely watched at 75.20 and 74.26 cents, with resistance at 77.96 and 79.78 cents. The market is poised for further fluctuations, with short covering and export performance likely playing pivotal roles in the near term. Traders should stay vigilant, considering both domestic and international developments, to navigate the evolving landscape effectively.
(By Commoditiescontrol Bureau: 09820130172)
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