Weekly: US Cotton Rises For Second Straight Week; Volatility Likely Ahead

MUMBAI (Commoditiescontrol) – U.S. cotton prices rose for a second straight week (Dec 3-7), sparked by optimism that trade truce between U.S. and China on the sidelines of the G20 meet will prompt China to import cotton and other agricultural products from Washington.

The prices managed to end on a firm note during the week, but have witnessed volatility amid lot of uncertainties related to OPEC meet, concerns over global economy and arrest of Chinese Technolgogy firm, Huawei Chief Finance Officer (CFO), who is also daughter of company director.

ICE March cotton settled this week with a gain of 1.67% at 80.23 cents per pound after moving in the range of 78.60 to 81.85 cents per pound. Prices have been extremely volatile this week after U.S. President Donald Trump's tweets on Monday dampened the jubilation of a Dec. 1 agreement by the United States and China, to a 90-day trade-war truce.

On Wednesday, the March contract rose nearly 2 percent on trade hopes, but shed nearly 3 percent on Thursday after the arrest of a top Chinese technology executive cast further shadows on U.S.-China trade relations.

Commodity prices have been seesawing constantly this week as the market tries to anticipate what is happening between the U.S. and China, and with the OPEC.

The thing that mainly supported cotton prices to close in positive territory was trade truce between and U.S, lower crop concern in India followed by bounce back in crude oil after OPEC decided to cut output by 1.2 million barrel.

U.S WEEKLY EXPORT SALES
U.S. net cotton export sales against 2018/19 MY were off notably Vs the previous period, while shipments were significantly higher at approximately 117,000 and 175,000 running bales (RBs), respectively.

The pace of week sales was down to realize the USDA’s export projection while shipments were ahead of the pace requirement. The US is 70% committed and 19% shipped against the USDA’s export projection of 15 million bales (480lb).

Sales against 2019/20 were nearly 81K RBs and stand at just above 2.1 million bales. Sales cancelations were significant at around 42,000 RBs. Most of which were attributable to China.

The recent weekly sales report is neutral to bearish due to higher cancellations by China and slow pace of sales.

CFTC ON CALL REPORT
Unfixed call against all contract for the week ended Nov 30 dropped further at 12.33 million bales (480lb), while producers purchase increased week on week at 4.01 million bales. on call sales against March contract was tad down at 4.3 million bales and producer purchases, however increased at 1.52 million bales.

Unfixed on call sales numbers are still on the higher side and may lend support to ICE cotton.

CFTC COT REPORT
CFTC cot report didn’t released this week amid closure of U.S market and it will now release on Dec 10.

CONCLUSION
Cotton prices are expected to trade volatile, with March contract have now strong support around 75-76 level. It is very difficult to predict market direct looking at the current global economic sentiment. At present we are neutral about the market and rather than predicting price direction will wait for USDA monthly supply-demand report, which may provide some cues for at least near term. Meanwhile long term outlook will depend on how trade truce will work out between U.S. and China and in case Chinese buyers remain on the sidelines rather than from buying U.S. then there is higher probability for ICE to test lower level.

TECHNICAL IDEA
ICE COTTON MARCH CONTRCT - FURTHER RISE IS ABOVE 81.85

Further Rise Is Above 81.85. Further rise is above 81.85.

Support will be at 78.60. Weakness will resume below 78.60.

Traders can buy above 81.85 with low of the week as the stop loss or 78.60 whichever is lower.

Lower range has support at 78.6-77.18-75.60.

A fall below 78.6 can show a slide to test 77.18-75.60.



(By Commoditiescontrol Bureau; +91-22-40015533)