Mumbai, 29 Jun (Commoditiescontrol): ICE cotton futures fell more than 3% on Friday after a USDA report indicated a significant increase in planted area for the natural fiber, leading to bearish market conditions.
The July ICE cotton futures contract closed at 69.81 cents per pound, down 221 points from the previous session. The December contract fell 189 points to 72.69 cents, and the March contract dropped 163 points to settle at 74.36 cents. Despite a 66-point gain earlier in the week, the December contract had fallen by 242 points in June. Contributing to the downturn, crude oil prices also decreased by 25 cents per barrel.
The USDA’s June Acreage report, released by the National Agricultural Statistics Service (NASS) on Friday morning, estimated the 2024 U.S. cotton acreage at 11.67 million acres. This represents a near 1 million acre increase from the March Intentions report and exceeds market estimates by more than 850,000 acres. The report also indicates a 14% rise in total cotton planted area for 2024, with Upland area increasing to 11.5 million acres. Traders view this data as bearish, noting that while these figures align with past trends of strong starts, farmers often opt for insurance or abandon the acreage later.
Amid these bearish conditions, cotton prices are set for a third consecutive monthly decline and a quarterly fall of around 14%. Earlier in the week, cotton prices attempted a rally but failed to sustain gains following disappointing export figures.
The USDA's weekly export report showed a total of 141,000 running bales (RB), marking a significant 29% decrease from the previous week. New crop sales hit a three-week low at 67,595 RB, and sales projections for 2023/2024 fell 52% to 90,600 RB. This downturn in export activity highlights a slowdown in demand, recording the lowest weekly total since late November.
Recent volatility in cotton prices has been driven by short covering activities, spurred by concerns over dry weather conditions affecting crop yields in major cotton-producing regions like Texas and the southeastern United States.
Market indicators show ICE certified cotton stocks at 59,035 bales as of June 27. The Cotlook A Index increased by 25 points on June 27 to 85.45 cents per pound, and the USDA Average World Price (AWP) rebounded from the previous week, up 1.58 cents to 58.23 cents per pound, effective through July 4. The next AWP, FCA, CCA, and LDP rate announcement from the FSA will be on Friday, July 5, at 8 AM EDT.
Speculative funds in cotton futures and options trimmed their net short position by 7,281 contracts as of June 25 to 36,738. Traders are closely monitoring technical support levels for the December Cotton contract, with expectations around 71.44 and 70.20 cents, while resistance is anticipated near 74.56 and 76.44 cents. Analysts suggest that while cotton might be bearish early next week, weather factors will dominate prices after July 4 and for the rest of the summer.
(By Commoditiescontrol Bureau: 09820130172)
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