MUMBAI (Commoditiescontrol) – ICE cotton futures bounced back this week ended Friday, snapping three weeks of losses due to short covering at the lower level ahead of G-20 meet. Market are slightly optimistic that U.S. and China's presidents will discuss positively about trade war. However, many experts have raises doubt and said anything could be happened.
Reuters on Friday reported that a Chinese official said "consensus is steadily increasing" in U.S.-China trade talks. The official added, according to the report, that differences between the two countries remained.
President Donald Trump and Chinese President Xi Jinping are scheduled to have dinner on Saturday and are expected to discuss trade issues between the two countries. Investors are eagerly looking ahead to the dinner, hoping the two leaders can quell trade-induced volatility in the global economy.
U.S. export sales during the last couple of sessions had shown some optimism about demand, but shipment remained slow in order to realize the USDA’s 2018-19 export target of 15 million bales (480lb) due to quality issue, which is giving shippers plenty of headaches.
Although there are concerns about the quality, but supply is sufficient due to worries over demand amid global growth.
The market is closely eyeing U.S. and China's presidents meeting on the sidelines of G-20 Summit, which will provide the catalyst to bulls and bears and till then nervousness in market is likely to persist.
U.S WEEKLY EXPORT SALES
Total net export sales and shipments for the week ended Nov 22 against the 2018/19 MY (Aug-Jul) dropped 22% and 13% at 198,056 Running Bales (RBs) and 135,923 RBs respectively. Sales were ahead of the weekly pace required to match the USDA’s export projection while shipments were again less than 50% of the pace requirement.
The US is 69% committed and 18% shipped Vs the USDA’s expectation. Sales against 2019/20 were nearly 19K RBs and stand at just above 2 million bales (480lb).
Weekly export cancellation was bit on the higher side at 18,400 RBs versus 17,300 RBs.
CFTC ON CALL
Mill on-call commitments against all active contracts were off significantly for the week ending Nov 23 at approximately 12.4 million bales (480lb). Producer commitments against all contracts reduced modestly at just below 4 million bales. Mill commitments against the 2018/19 MY are approximately 9.6 million bales versus around 1.9 million bales of producer commitments, which should provide some support for ICE cotton futures.
CFTC COT COMITTMENTS
Trade short have reduced bearish bets further by 3.3% at just over 11 million bales (480lb), whereas hedge funds and speculators too had cut bullish bets by 2.5% and nearly 6%. Trades are now holding bearish bets of around 11 million bales (480lb), down 37% from same period a year ago. Managed money and speculators long positions stood at 4.1 million bales and 0.65 million bales.
In the past we have mentioned in our report that managed money and speculators had reduced bullish bets by more than reduction of shorts by trades.
CONCLUSION
Cotton prices are now balanced and could move either side. Trigger for the next week will be outcome of G20 meeting between U.S. and China's presidents. A positive discussion will provide an edge to the bulls as prices are already around attractive level, but negative talk will trigger fresh selling. The other factor that needs to be watched out closely is lesser quantity of exportable grade with U.S. The difference between lower/average and premium grade will increase with lower/average grade price is likely to fetch discounted rate and may pressure on ICE futures. Sharp losses in crude oil too are negative for cotton, but OPEC and non-OPEC meet on Dec 6 to discuss about cut in production. Concern about global economy, especially emerging markets are also a crucial factor need to closely watch.
In short, global economy, OPEC meet, U.S-China trade war and currency are the factors that will decide the future course of trend in cotton.
(By Commoditiescontrol Bureau; +91-22-40015533)
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