Mumbai, 1 Jul (Commoditiescontrol): Cotton futures reversed their previous three week of losses by closing the week to Jun 30th higher helped by bottom-picking and shorts covering as well as from the drop in U.S. planted area.
ICE cotton futures edged higher on Friday, drawing support from weaker dollar, strong equities and grain markets, while lower than expected U.S. cotton acreage report fanned fears of less supplies.
Traders were also busy squaring positions in front of USDA's Planted Acres Report, as well as the mid-year mark.
ICE Cotton contracts for July 2023 settled at 82.84 cents, up 1.59 cents and December ended at 80.37, up 1.34 cents and March was 80.25 cents, 1.21 cents higher. Estimated volume was 6,710 contracts. Prices were up more than 2% for the week. For the week, December ended as a net 170 point gain. That also flipped Dec cotton to a net 90 point gain for the month of June.
Spot July remains in its notice period. Friday there were no deliveries for the contract. However, 171 notices have been tendered. The contract will expire July 7.
Helping the natural fiber market was the market remaining in the oversold territory for too long. Also, gains at Wall Street and grains supported the up-move.
The complex benefited from USDA's Planted Acres Report, and the mid-year mark helped keep markets fairly supported. Crop Progress data from Monday showed condition ratings rising 2% to 49% gd/ex. That drove a 5-point increase in the Brugler500 index, to 331.
The NASS survey data saw 11.087 million acres dedicated to cotton in the June update. The average trade guess was to see no change from 11.2m acres reported in March. Recall the June WASDE cut abandonment. The largest cut came via 118,000 fewer acres for Texas, now at 6.117 million. Kansas, North Carolina, Oklahoma, and Virginia increased their area from March as most other states were down 10,000-30,000 acres.
However, gains are being capped by sluggish cotton weekly export sales. They remain weaker than the prior four-week average.
The USDA weekly report showed net sales of 125,600 running bales (RB), noticeably up from the previous week, but down 44% from the prior four-week average. USDA marked China and Vietnam as the week’s top buyers. Cotton exports for the week were 225,000 RBs for a season total of 10.488 million. That trails last year’s pace by 9% and is 85% of the USDA full year forecast. The 5-yr average pace would be 88% by this date. Cotton export sales commitments are 12% smaller than a year ago. They are 112% of USDA’s updated WASDE forecast (normally 114%).
USDA’s weekly Cotton Market Review had 3,927 bales sold for the week at an average price of 72.69 cents. The Cotlook A Index was back up by 20 points to 88.90 cents for Jun 29. The AWP is 65.50 cents/lb through Thursday. ICE Certified stocks were 17,051 bales on Jun 28.
The weekly Commitment of Traders report indicated that large money managers were extending their bearish bets in the week that ended on Jun 27 by 10,287 contracts. They held a net short position of 15,809 contracts as of Tuesday.
Finally, the six- to 10-day forecast for West Texas calls near-normal temperatures and above-normal rainfall. The extended eight- to 14-day outlook indicates slightly above-normal temperatures with normal precipitation.
Elsewhere, the Federal Reserve Chairman Jerome Powell continues to maintain a tough stance on inflation. In his address at an economic forum in Portugal Wednesday, Powell underlined the need for multiple interest rate increases, which will be aggressively unfolded in the coming months. His comments reiterated the position held by the Federal Reserve's board at its June meeting. Additional rate hikes will be, as he said, "data dependent."
Certain technical momentum indicators have fallen to their lowest levels since November 2022. Such negativity encourages traders to sell rallies.
For Monday, support for the July Cotton contract is at 79.06 cents and 77.74 cents, with resistance at 81.14 cents and 81.90 cents.
(By Commoditiescontrol Bureau: 09820130172)
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