MUMBAI (Commoditiesontrol) – Cotton prices on the Intercontinental Exchange ended down despite the healthy weekly export sales data as traders preferred to remain cautious amid clarity over the trade deal even as China ad US are scheduled to meet in October. Easing worries over hurricane Dorian’s impact on the cotton crop also pushed prices lower.
The most active December cotton contract ended down 0.4% at 58.58 cents per lb. Volumes in the December contract inched up to 16,068 compared with 10,578 a week ago. The March 2020 contract ended down 0.2% to 59.31 cents per lb.
Prices started on a weak note as hostile remarks from the US President Donald Trump on China continued on twitter.
“We are doing very well in our negotiations with China. While I am sure they would love to be dealing with a new administration so they could continue their practice of “ripoff USA”($600 Billion/year)… And then, think about what happens to China when I win. The deal would get MUCH TOUGHER! In the meantime, China’s Supply Chain will crumble and businesses, jobs and money will be gone!” Trump tweeted on Tuesday.
However, prices soon reversed losses as hurricane Dorian made a downfall in southern and northern states of Carolina, among the cotton-growing states in the US.
News of Hong Kong leader Carrie Lam withdrawing the controversial extradition law to soothe the protests in Hong Kong also boosted prices. This move led to expectations that China may yield to a trade deal between the US and China as well. A few days back, US President Donald Trump had linked the signing of the trade treaty with the protests in Hong Kong.
Prices further got a shot in the arm by the middle of the week after China’s commerce ministry on Thursday released a statement saying it will resume talks with the US in early October. China-Vice Premier and chief trade negotiator Liu He has spoken with US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin over the phone about the talks, the statement said.
Although, hurricane Dorian was downgraded to a Category 2 storm, the impact on the crop in the states of Carolina was eyed.
However, prices retreated by Friday as Hurricane Dorian, which made a landfall in Carolina, did not cause much damage to the crop.
Friday, a Bloomberg report quoted President of the Carolinas Cotton Growers Cooperative Wayne Boseman saying that the extent of the damage to the cotton crop in the Carolina states was “less than anticipated”.
“There are some pockets that experienced heavy rain and wind but overall the storm was not as bad as we thought,” Boseman said.
The uncertainty looming over the trade talks, even as talks were scheduled for next month, added to the bearish sentiment.
White House economic adviser Larry Kudlow on Friday hinted that the trade conflict between the US and China could take years to resolve.
"A deal of this size and scope and central global importance, I don't think 18 months is a very long time…The stakes are so high, we have to get it right, and if that takes a decade, so be it," Kudlow told reporters.
Traders even ignored the rise in the weekly export sales for the week ended August 29. During the week, net sales for 2019-20 stood at 162,800 RB compared with 146,000 RB a week ago. For 2020-21, net sales of 198,200 RB were reported compared with 23,200 RB a week ago. Net sales of the high-grade Pima cotton totalled 900 RB compared with 4,900 RB the previous week with increases to India (2,100 RB), and reductions from China (1,300 RB).
The weekly crop progress report by the USDA for the week ended September 1 released at the beginning of the week was also brushed aside by the market. The report showed the “good” rating of the 15-cotton growing states improved to 39% from 35% previous week. The “excellent” rating inched up to 9% from 8% previous week.
Data released by the US Commodities Futures Trading Commission data for the week to September 3 showed managed money traders added net long positions by 1,148 thereby taking total net short positions to 39,281. Open interest for the week stood at 291,123, up 5,294 on week.
With the hurricane Dorian moving away from the US coast, prices could open with a soft bias. Traders may also take note of the crop progress report on Monday. The support and resistance for the December contract are seen at 59.62 cents and 57.79 cents respectively.
(Commoditiescontrol Bureau)
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