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Weekly: ICE cotton futures extend fall for sixth straight week on technical selling, strong dollar

15 Apr 2024 8:41 am
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Mumbai, 15 Apr (Commoditiescontrol): There's no sign of stoppage to the cotton price slide in the near term. The natural fibre encountered yet another week of price decline due to technical pressure and a stronger US dollar hovering over the market. The week ended April 12th market sixth straight weekly loss for cotton.

ICE cotton futures extended their recent losing streak on Friday, dropping to near three-month low and recorded their sixth straight week of declines, pressured by speculative selling and a robust U.S. dollar.

The dollar index rose about 0.7% jumping to its highest since early November against its rivals, making the natural fibre more expensive for overseas buyers.

However, putting a floor under prices, global oil benchmark Brent prices stayed high as supplies faced fresh threats from escalating conflict in the Middle East. Higher oil prices make cotton-substitute polyester more expensive.

ICE Cotton contracts for May closed at 82.62 cents, 75 points lower. Jul settled at 84.59 cents, losing 66 points. Dec ended 58 point weak at 80.11 cents. Cotton futures were down 17 to 75 points in most contracts on Friday’s close. Crude oil backed off the early strength to close with gains of just 44 cents.It settled 4% lower for the week. The Cotton On-Call report from CFTC showed unfixed call sales at 10,572 contracts for May as of 4/5, a 4,198 drop from the week previous. For July, unfixed call sales are 22,995 contracts, with the total at 68,015 contracts.

The initial Crop Progress report from NASS this year pegged the US cotton crop at 6% planted, slightly behind the 5% average for April 7.

The U.S. Department of Agriculture's (USDA) weekly export sales report showed net sales of 81,500 running bales for 2023/2024, down 4% from the previous week, and 10% from the prior 4-week average.

According to the World Agricultural Supply and Demand Estimates (WASDE) report on Thursday, world trade for 2023/24 was projected 700,000 bales higher this month to nearly 44 million.

USDA left the US cotton balance sheet alone this month, as they wait for final production data next month. Stocks are still at 2.5 million bales, though the US average farm price was trimmed by a penny to 76 cents. The World cotton S&D table was a 0.26 million bale cut to stocks at 83.08 million bales, mainly on tighter carryover from the previous crop year.

World trade for 2023/24 was projected 700,000 bales higher this month to nearly 44 million, as a 1.3-million-bale increase in China's imports was partially offset by reductions for Pakistan and Indonesia, as per the report.

Global ending stocks for 2023/24 were projected down nearly 300,000 bales in April as lower stocks across West Africa, Australia and Brazil more than offset higher supplies in China, the report added.

The Cotlook A Index was back down 75 points to 91.40 cents/lb on April 11. The AWP dropped another 405 points to 65.43 yesterday and is good through next week.

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.

As observed in the previous weekly report, time and again, the demand/supply factors are key determinant of cotton trade, and little support from technical indicators such as traders cutting long position and falling open interest. The skepticism about the U.S. cotton prices gaining traction this year is neutralised by China buying cotton from other countries such as Brazil and Australia. Traders trimming their net long position in cotton futures, suggests cotton prices have entered consolidation phase once again.

For Monday, support for the Jul Cotton contract is at 83.65 cents and 82.72 cents, with resistance at 85.71 cents and 86.84 cents.

(By Commoditiescontrol Bureau: 09820130172)

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