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ICE Cotton Upward Rally Comes to a Halt; Slips from Over 9 – Month High as Mills Trim Buying

21 Oct 2020 7:16 am
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Mumbai (Commodities Control) – ICE cotton futures fell from a more than nine month peak on Tuesday, breaking seven sessions of gains as higher prices of the natural fiber prompted mills to reduce purchases.

The cotton contract for December closed at 71.02 cents, down 14 points.The front-month contract earlier hit its highest since Jan. 14 at 71.65 cents.Mar 21 Cotton closed at 71.70 cents, down 13 points and May 21 Cotton closed at 72.29 cents, down 12 points.

"Demand has been curtailed a bit as the market has been up seven cents in the last three weeks and generally a price rise like that will force mill buyers to cut back their purchases," said Rogers Varner, president of Varner Brokerage in Cleveland.

Cotton prices have risen more than 40% since touching an 11-year low in early April when prices fell below 50 cents because there was no demand at the height of the novel coronavirus pandemic.

Meanwhile, the U.S. Department of Agriculture's weekly crop progress data on Monday showed that 34% of cotton was harvested in the United States as of the week ended Oct. 18, up from 26% in the preceding week.

The report also showed 40% of cotton was in good/excellent condition, unchanged from the preceding week.

Meanwhile, the market is looking forward to Thursday’s export sales report. Last week, sales were weaker but Pakistan and Bangladesh emerged as prominent buyers. The rationale is that, perhaps, COVID-19 is lifting in those nations, as it is thought to be doing so in other Asian countries. Subsequently, those countries are attempting to open up their economies, and need raw cotton to feed their mills.

Total futures market volume fell by 12,157 to 25,778 lots. Data showed total open interest gained 4,697 to 241,920 contracts in the previous session.

Certificated cotton stocks deliverable as of Oct. 19 totaled 29,464 480-lb bales, up from 26,041 in the previous session.

Support and Resistance for Cotton #2 lies at 69.64 cents and 72.34 cents per lb, respectively.

(Commodities Control Bureau)

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