Mumbai, 11 Apr (Commoditiescontrol): ICE cotton futures ended mixed on Wednesday, the front month contract slipped to a four-month low, pressured by a surge in the U.S. dollar and an overall downbeat sentiment in the financial market. Hotter-than-expected U.S. inflation data has dashed hopes of early interest rate cut. That sent U.S. dollar and treasury yield higher.
Oil prices rebounded as there is no end to Middle East tension in sight. Higher oil prices make polyester - a cotton substitute - more expensive.
ICE Cotton contracts for May closed at 85.31 cents, 73 points lower. Jul settled at 87.07 cents, losing 77 points. Dec ended 7 point strong at 81.43 cents. May cotton continues to slide lower as traders exit ahead of USDA reports and Friday’s May options expiration. December and the other new crop contracts also saw sell pressure. Rally in the US dollar index added pressure to the old crop months.
Certified cotton stocks, which can be delivered against the contract, were at 93,324 bales compared with 67,576 bales on April 1, according to ICE data.
The U.S. Department of Agriculture's (USDA) weekly export sales report on Thursday showed net sales of 84,900 running bales for 2023/2024, down 14% from the previous week but up 4% from the prior 4-week average.
The weekly Crop Progress report had cotton planting across the US at 5%, which was down 1% from the 5-year average pace.
U.S. private forecaster AccuWeather expects an above-average 2024 Atlantic hurricane season with a near-record number of storms and a greater-than-usual risk of direct impacts in parts of Florida, Texas and the Carolina, it said on Wednesday.
There's expectation for better demand, especially from India and China and the demand will impact the ending stocks even more. Yet, stifled demand due to high cotton prices above 90 cents, makes it difficult for mills to buy, which is pressurizing the market. A slight decrease in supply and demand is expected in the near term, with prices likely to remain volatile but will hold between 90-96 cents.
Elsewhere, USDA raised its forecast for Australia's cotton production in the current season by 200,000 bales to 5 million and said the country would produce 5.5 million bales in the 2024/2025.
The Seam had a total of just 513 bales sold on April 9, for an average price of 61.75 cents. That was a sharp 6.63 cent drop from the previous sale, though volume was light. The Cotlook A Index was back up 70 points to 92.65 cents/lb on April 8. The AWP weakened by another 140 points to 69.48 last Thursday and is in effect through this coming Thursday.
Cotton spec traders were shown 3,900 contracts less net long for the week after a bout of long liquidation. The CoT report had the group 80,600 contracts net long as of the settle. Commercial cotton traders were adding new hedges, though the shorts offset the new longs for a 4,000 contract swing to 127,600 contracts net short as of April 2.
Investors now await the release of the World Agriculture Supply and Demand Estimates (WASDE) report, due on April 11.
For Thursday, support for the Jul Cotton contract is at 86.56 cents and 86.05 cents, with resistance at 88.05 cents and 89.03 cents.
(By Commoditiescontrol Bureau: 09820130172)
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