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ICE Cotton Ends Lower As Export Sales Eases; Demand Woes Outstrip Stimulus Deal

27 Mar 2020 8:32 am
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Mumbai (Commodities Control) – Cotton futures ended Thursday’s trading session with 43 to 70 point losses. Cotton sales from the weekly Export Sales report were 277,091 RBs on the week ending 19th March. That is 19% lower W/W, and 23% from the prior 4-week average.

US net cotton sales were at 340,700 RB for the week ended March 12.

ICE cotton futures fell as much as 1.8% on Thursday as concerns over demand hit by the coronavirus outbreak overshadowed a $2 trillion rescue package passed by the U.S. Senate.

Cotton contract for May settled down 63 points at 52.81 cents per lb. It traded within a range of 52.5 and 54.01 cents a lb. July Cotton closed at 52.83 cents, down 70 points. October Cotton closed unchanged at 55.19 cents and December Cotton ended at 54.61 cents, down 43 points.

"People are on a lockdown, they're not moving around, they aren't ... doing anything, any type of commerce. So cotton kind of represents that," said John Payne, senior broker at Daniels Trading, adding: "There's a major disconnect between actual fundamentals as far as supply-demand is concerned."

Experts find this to be a good buying opportunity for the long run and consider cotton to have bottomed at the low 50s.

The U.S. Senate on Wednesday unanimously backed a $2 trillion bill aimed at helping unemployed workers and industries hurt by the coronavirus outbreak, as well as providing billions of dollars to buy urgently needed medical equipment.

The package is intended to flood the U.S. economy with cash in a bid to stem the impact of a health crisis that has resulted in the deaths of more than 900 people in the United States alone.

"If the expansionary measures being implemented by numerous governments and central banks have the desired effect, this should boost demand for textiles – and thus also for cotton – again and shore up prices, though we do not anticipate any pronounced catch-up effects after the crisis," Michaela Helbing-Kuhl, agriculture analyst at Commerzbank said in a note.

Exacerbating demand concerns was a surge in the number of Americans filing claims for unemployment benefits to a record of more than 3 million last week.

Total futures market volume fell by 7,934 to 22,744 lots. Data showed total open interest fell 2,493 to 193,189 contracts in the previous session.

Support and Resistance for Cotton #2 lies at 51.59 cents and 54.61 cents/lb, respectively.

(Commodities Control Bureau)

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