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Weekly: Cotton Prices Slide for Third Consecutive Week Amid Weak Demand and Strong Dollar

17 Jun 2024 8:52 am
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Mumbai, 17 Jun (Commoditiescontrol): Cotton prices continued their downward trend for the third consecutive week, falling nearly 3% during the week ending June 14, driven by sluggish demand and a stronger U.S. dollar. Despite the bearish tone, concerns over global supply constraints and weather-related issues have slightly mitigated the decline.

ICE cotton futures showed mixed results on Friday. The July ICE cotton futures contract dropped 38 points to settle at 70.97 cents per pound, while the December contract rose 35 points to 72.14 cents. The March contract also saw an increase, adding 12 points to reach 73.43 cents. Throughout the week, July futures declined by 287 points and December futures by 75 points, with smaller declines in deferred contracts ranging from 8 to 34 points.

The recent dip into the 70-cent range triggered a price limit reduction to 3 cents per pound, with cotton futures hitting a 19-month low earlier in the week. Additionally, the U.S. Dollar Index saw a significant rise of 318 points during the session, contributing to the pressure on cotton prices. The Federal Open Market Committee (FOMC) maintained interest rates, with only one potential rate cut expected in 2024.

USDA export data revealed sales of 186,600 running bales (RB), marking a 19% increase from the previous week but 3% below the four-week average. China, the leading consumer, accounted for 73,400 RB. Net sales for the 2023/2024 marketing year rose by 28% from the previous week, though they were 2% lower than the prior four-week average.

Weaker-than-expected shipments further pressured cotton prices. The USDA's World Agricultural Supply and Demand Estimates (WASDE) report indicated a reduction of 500,000 bales in U.S. export projections, now at 11.8 million bales. Consequently, old crop stocks increased by 450,000 bales to 2.85 million, and new crop ending stocks rose by 400,000 bales to 4.1 million.

Globally, the 2023/24 carryout increased by 490,000 bales to 80.97 million, while new crop projections rose by 489,000 bales to 83.49 million, reflecting higher beginning stocks and production but reduced trade and consumption. ICE certified cotton stocks continued to build, reaching 138,247 bales on June 11.

The Cotlook A Index fell by 85 points on June 13 to 81.85 cents per pound, and the USDA Average World Price (AWP) decreased by 81 points to 57.32 cents per pound, effective through next Thursday. Meanwhile, China's agriculture ministry raised its cotton import forecast for the 2023/24 crop year by 200,000 metric tons.

Traders are closely monitoring technical support levels for the December contract at 71.59 and 71.04 cents, with resistance at 72.65 and 73.16 cents. The CFTC data showed managed money spec funds at their largest net short position in nearly five years, totaling 35,735 contracts, an increase of 11,827 contracts for the week ending June 11.The ongoing pressure from a stronger U.S. dollar and weaker demand continues to drive cotton prices downward. Despite this, concerns about global supply constraints and weather conditions provide some support, indicating that the market remains volatile and closely monitored by traders.

(By Commoditiescontrol Bureau: 09820130172)

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