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ICE Cotton Cracks On Escalating Pandemic Threatening Global Growth

27 Feb 2020 7:23 am
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Mumbai (Commodities Control) – Cotton futures fell to a 2-1/2-month low on Wednesday as fear of an economic slowdown arising from the globally spreading coronavirus weighed on investor sentiment.

Front month cotton futures ended with more losses on Wednesday with contracts falling further by 78 to 115 points. May contract have posted 5 consecutive red candles for a net loss of 4.33 cents/lb.

Cotton contracts for May fell 83 points to settle at 65.47 cents per lb, after hitting their lowest since Dec. 5 at 65.40 cents. It traded within a range of 65.43 and 66.85 cents a lb. July Cotton closed at 66.08 cents, down 84 points. October cotton ended at 65.25 cents, down 115 points.

Cotton has fallen about 4% so far this month on virus woes.

March cotton remains in its delivery period. There have been a few notices tendered, but they have all been stopped by a strong commercial and otherwise have played no effective role in the market’s downdraft.

"Prices are down because there is spillover from the coronavirus long liquidation... It is difficult to quantify the coronavirus and people are unsure, which is leading to the liquidation of positions," said Rogers Varner, president of Varner Brokerage in Cleveland, Mississippi.

The extent of economic hit remained unclear as the coronavirus spread further in South Korea and Italy, while Greece and Brazil reported their first cases of the virus.

Economic activity in China, epicenter of the outbreak, has widely been disrupted, fading expectations for increased Chinese imports of U.S. agricultural goods - as called for under a Phase 1 trade agreement between Washington and Beijing.

Investors await the weekly export sales report from the U.S. Department of Agriculture due on Thursday.

Total futures market volume fell by 4,676 to 32,923 lots. Data showed total open interest fell 1,877 to 194,910 contracts in the previous session.

Support and Resistance for Cotton #2 lies at 64.42 cents and 67.38 cents/lb, respectively.

(Commodities Control Bureau)

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