Mumbai, 29 Apr (Commoditiescontrol): Cotton complex largely appeared calm during the week ended April 26th as liquidation pressure ahead of May contract expiry abated. However, the strengthening dollar and elevated risk from higher-for-longer interest rate could clamp down expectations of price gain in the near term.
ICE cotton futures ended mixed on Friday, as gains in oil and financial markets offset pressure from a stronger dollar and sluggish demand outlook.
Global financial markets advanced Friday led by strong earnings by US tech giants Alphabet (Google parent company) and firm oil prices making cotton-substitute polyester more expensive.
Limiting gains, the U.S. dollar gained 0.5%, making cotton more expensive, especially for overseas buyers. Further, the sluggish demand for natural fiber continued to weigh on prices.
ICE Cotton contracts for May closed at 80.07 cents, 49 points higher. Jul settled at 81.35 cents, adding 27 points. Dec ended 3 point weak at 77.61 cents. The front month contract recorded just 12 points net loss for the week.
Cotton complex was largely influenced by the mixed outside market forces such as crude oil and dollar, which added risk premium ahead of the weekend.
There were 198 contracts delivered against May cotton, all by BNP Paribas Securities.
On Thursday, the U.S. Department of Agriculture's (USDA) weekly export sales report showed net sales of 177,100 running bales for 2023/2024, up 21% from the previous week and 73% from the prior four-week average.
The report also showed exports of 261,700 running bales, down 2% from the previous week and 18% from the prior four-week average.
Weighing on sentiment, U.S. stocks slumped amid signs of persistent inflation that dampened hopes of the Federal Reserve easing monetary policy anytime soon.
On planting front, the US cotton crop is now 11% planted as of April 21 according to the NASS Crop Progress report from this afternoon. That matches both the 5-year average and last year’s pace. The largest state of Texas was on pace with normal at 16% complete, with Georgia 4% and 1% behind normal.
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.
ICE certified cotton stocks were up another 3,283 bales on April 25 at 181,430 bales. The Cotlook A Index was down another 45 points to 87.80 cents/lb on April 25. The AWP dropped another 85 points to 61.33 in Thursday afternoon’s release and is in effect through next Thursday.
Commitment of Traders data confirmed a continuing exodus of the managed money spec longs in cotton futures and options during the week that ended on April 23. They exited 10,779 longs during the week, while their compatriots added 15,862 new shorts. The spec fund net long on Tuesday night had declined to 9.501 contracts.
We continue to maintain out view of cotton trending soft in the near term as the demand/supply hold a key determinant for cotton trade. On the technical front, cotton prices are trading below 50-, 100- and 200-day moving averages. Speculators who trade on technical signals regard a break below such moving averages as a bearish sign. 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 80.48 cents and 80.07 cents, with resistance at 81.49 cents and 82.09 cents.
(By Commoditiescontrol Bureau: 09820130172)
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