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ICE Cotton futures rebounds on China demand hopes; WASDE in focus

8 Feb 2023 8:18 am
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Mumbai, 8 FEB (Commoditiescontrol): ICE Cotton futures rose more than 4% on Tuesday on hopes of strong demand from China and short covering ahead of a monthly supply and demand report from the U.S. Department of Agriculture.

ICE Cotton contracts for March 2023 finished at 85.63 cents, up 2.36, July settled at 87.06, up 2.21, and December 23 ended at 85.82, 1.01 higher.

March Cotton's option expires this Friday, Feb. 10. Right now, it is hard to know what strike level will be key for traders.

There is optimism about demand emerging out of China as the nation ramps up its recovery from COVID, dealers said. However, the Chinese balloon surveillance incident has got some cotton traders nervous, they added. China is one of the top consumers of U.S. cotton.

Investors now look forward to the USDA's monthly World Agricultural Supply and Demand Estimates (WASDE) report due on Wednesday.

Meanwhile, oil prices rose for a second-straight session. Lower oil prices make polyester, a cotton substitute, less expensive. Dollar weakness following the Federal Reserve Chairman Jerome Powell's remark also aided the gain in cotton price.

This Thursday USDA will issue its February crop report, with the possibility of making certain adjustments. For that report, traders are looking for U.S. 2022/23 production to be at 14.56 million bales. This would be less than last month when tabulators pegged the crop at 14.68 million bales. Ending stocks are expected to come in at 4.08 million bales, down from 4.20 million in January. While world ending stocks are expected to come in at 90.06 million bales, slightly up from 89.93 million reported in January.

The December cotton export was confirmed at 675,431 bales according to official Census data. That was a 22% drop from November’s export and was 11% lighter on year. The full season data reached 3.917m bales through December.

The Cotlook A Index was a penny weaker at 100.70 cents for Feb 06. The AWP for cotton is 75.24 cents for the week.

Elsewhere, the Commitment of Traders report showed managed money firms were closing 5,100 shorts and adding 3,900 new longs through the week that ended Jan 24. That flipped the group back to net long, with a 7,122 contract net long as of Tuesday’s settle. Commercial cotton traders added 7,500 new short hedgers for a 40,416 contract net short.

For Wednesday, support for the March Cotton contract is at 83.60 cents and 81.58 cents, with resistance at 87.32 cents and 89.02 cents.

(By Commoditiescontrol Bureau: 09820130172)

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