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Weekly: ICE cotton futures edge higher amid increased demand, weaker dollar

24 Oct 2021 9:33 pm
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Mumbai (Commoditiescontrol): ICE cotton futures edged higher this week amid increased demand from top consumer China and a weaker dollar.

The most active December cotton contract closed with a gain of 93 points or 0.90 percent at 108.26 cents per lb, whereas March 22 contract gained 119 points or 1.10 percent and finished at 106.19 cents per lb for the week ended on 22nd October.

"China seems to be catching up quickly, as more business took place this week," analyst said in a note.

"It makes sense that China would import more cotton, because not only had the Reserve to release more stocks than originally planned to tie mills over to new crop, but there is also a huge price incentive to chase after foreign cotton."

The U.S. Department of Agriculture's weekly crop progress report on Monday showed 64 percent of the cotton crop was in a good-to-excellent condition in the week ending Oct. 17, unchanged from the prior week.

The U.S. Department of Agriculture's (USDA) weekly export sales report showed cotton sales were up "noticeably" from the previous week and up 20 percent from the prior 4-week average. The increases were primarily for China. New net sales for the 2021/2022 crop year were reported for 391,800 Upland bales and 23,900 Pima bales. 63,900 bales were sold for the 2022/2023 marketing year.

The weekly data release from CFTC showed managed money was 81,427 contracts net long on 19th October; down 6,018 contracts from the previous week. Long side positions decreased by 5,978 contracts while short side positions witnessed a rise of 41 contracts. Trade increased their long side position by 3,868 contracts, while short decreased by 5,088 contracts. The open interest for the week was registered at 371,676 vs 379,358 contracts last week.

Cotton-on-Call based New York, dated 21st October showed that the total unfixed call sales were reported at 159,526 vs 150,995 contracts on a weekly basis and total unfixed call purchases were reported at 43,604 vs 39,505 contracts. For December 2021, unfixed call sales were registered at 33,970 vs 35,817 contracts and unfixed call purchases were registered at 10,929 vs 12,405 contracts.

Meanwhile, the equities markets had a great week, continuing their rally that was sparked by better-than-expected earnings and retail sales, as well as lower-than-expected jobless claims. Throughout the week, commodity markets were volatile.

However, the six- to 10-day outlook indicates a dry Texas, but the Delta and the Southeast may see increased chances for rain.

China cotton and yarn futures both closed down for the week . ZCE benchmark cotton yarn was Jan 22 futures down 2.41% 28770 CNY/MT . On the other hand, ZCE benchmark cotton Jan22 futures was down 3.88% at 21060 CNY/MT. In near term ZCE cotton yarn should outperform ZCE cotton futures as supply for cotton increases due to new crop arrival and strong global demand for yarn and fabric should keep yarn price relatively firm.

Looking ahead next week, traders will focus on the crop's harvest numbers on Monday and export sales on Thursday. Lastly, the time for Index funds to start rolling their passive long positions forward is rapidly approaching, and traders will be paying close attention to both fixations of open On-Call contracts and to the rolling forward of their hedge position.

Market have a limited upside for the near term as managed money has started liquidating its long position we may see more long liquidation before December expiry. Further gradual increase supply in Indian markets will restrict any up move. At the same time downside should be limited as there is strong demand for fabric and apparels in global market. Immediate support and resistance for Cotton #2 lies at 105.04 and 110.66 cents per lb, respectively.

(By Commoditiescontrol Bureau: +91-22-40015505)


       
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