Mumbai, 11 Mar (Commoditiescontrol): Cotton complex witnessed choppy action during the week ended Mar 8th, as traders exploited recent surge in prices to book profit through intermittent selling. The worries over global demand, particualrly China demand, was at the core of swift price movement. As a result, the complex ended lower, snapping eight straight weeks winning streak.
ICE cotton futures ended limit down on Friday, especially May settlement contract, as wide price difference between March expired contract and the now spot month May contract induced technical selling. Cotton suffered despite of softer dollar and the forecast for drop in U.S. cotton crop yields.
The dollar index set its sharpest weekly drop of the year. A weaker dollar makes natural fiber less expensive for buyers holding other currencies.
ICE Cotton contracts for May closed at 95.28 cents, 400 points lower. Jul settled at 93.96 cents, losing 382 points. Dec ended 143 point weak at 82.91 cents. May ended the week net 29 points or 0.30% lower.
While old cotton crop faced sharp sell-off on the cotton complex, new crop futures fared relatively better. New crop futures are down by 121 to 160 points so far. USDA left the cash price at 77 cents/lb.
United State Department of Agriculture (USDA) came out with the market friendly info on Friday. The federal agency surprisingly cut the cotton yield by another 23 lbs per acre to 822. That lowered production and tightened stocks with no other change to use. Cotton stocks are now projected at the tightest since 12/13 at 2.5 million lbs. Stocks/Use is still just a 2-year low.
On Thursday, FAS reported 52,000 RBs of cotton was sold for export during the week that ended Feb 29. That was up from the MY low last week but still 100,000 RBs shy of the 4-wk average. The week’s exports were listed at 331,000 RBs.
There is stifled demand due to high cotton prices as prices are above 90 cents, making it difficult for mills to buy, which is pressurising the market, dealers said. They expect a slight decrease in supply and demand in the near term, with prices likely to remain volatile but will hold between 90-96 cents in the near term.
The updated 7-day QPF from NOAA has heavy rain fall for central AL/GA of "5”. The surrounding Southeast states should also expect rain, though the forecast dries up by central Texas.
Elsewhere, the Australian agriculture ministry raised its estimate for the country's 2023/24 cotton production. It estimated cotton production at 1 million tons versus previous forecast of 925,000 tons.
The Cotlook A Index fell by 30 points to 101.05 cents/lb on Mar 5. The Seam had 4,664 bales sold on Mar 4 for an average gross price of 88.63 cents/lb. The AWP was down 59 points to 76.88 cents/lb. ICE certified stocks were 1,636 bales as of Mar 4.
CFTC’s weekly Commitment of Traders report showed managed money funds were adding another 2,323 contracts to their net long in cotton futures and options. They took that net position to 96,361 contracts as of Tuesday March 5, the largest since October 2021.
Cotton complex has returned to focus on fundamental factors, particularly demand, after being influence by key technical indicators such as traders covering shorts after price dropping to near one-month low and March contract nearing its expiry. The skepticism about the U.S. cotton prices gaining traction this year has neutralised by China buying cotton from Brazil and Australia. Yet, the traders are piling on their net long position in cotton futures, which indicates continuation of firm price trend for some more time.
For Monday, support for the May Cotton contract is at 93.21 cents and 91.13 cents, with resistance at 99.43 cents and 103.57 cents.
(By Commoditiescontrol Bureau: 09820130172)
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