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ICE Cotton Dips Sharply On Fall In Crude, Equities; Eyes On USDA report

24 Jan 2020 7:23 am
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Mumbai (Commodities Control) – Cotton futures fell heavily on Thursday as mounting worries over a coronavirus outbreak in China weighed on market sentiment and pushed equities and oil prices lower, while investors awaited for the weekly export sales report.

Cotton contracts for March fell 110 points to settle at 70.03 cents per lb. It traded within a range of 69.8 and 71 cents per lb. While May Cotton closed 109 points to end at 70.75 cents/lb. July 20 cotton closed at 71.59 cents, down 115 points and October Cotton closed 294 points to settle at 69.79 cents.

The current coronavirus has caused the Chinese government to isolate several cities with populations of millions. Thus, with the Lunar New Year celebration fast approaching, which is a very popular travel time, it is thought that some air travel will be either reduced or restricted.

"Stock markets and crude oil are down, that's negative. Volumes are lower today, and I think traders are going to wait till exports sales numbers and then determine where to go," said Keith Brown, principal at cotton brokers Keith Brown and Co in Moultrie, Georgia.

The energy futures were sharply lower. To that end, it is the understanding that polyester can arrive in the U.S. at 62-cents per pound. Oil prices dropped more than 2% on concern that the spread of a respiratory virus could lower fuel demand if it stunts economic growth.

World shares fell as concern mounted about a new coronavirus outbreak in China.

However, one positive, albeit small one, from Thursday’s heavy session is that the market closed above the psychological 70-cent mark.

The U.S. Department of Agriculture (USDA) will release the weekly export sales report on Friday, delayed due to a U.S. holiday earlier this week.

Last week, the USDA in its weekly export-sales report showed net sales of 232,900 running bales (RB) for the 2019/20 marketing year for the period ended Jan. 9.

"The market is consolidating as it processes its disappointment with the lack of obvious Chinese buying after the Phase 1 trade deal," Brown said.

China committed to buy $40 billion in U.S. agricultural products annually over the next two years under the Phase 1 trade deal.

Total futures market volume fell by 32,337 to 24,169 lots. Data showed total open interest gained 2,986 to 261,004 contracts in the previous session.

Certificated cotton stocks deliverable as of Jan. 22 totaled 6,792 480-lb bales, unchanged from 6,792 in the previous session.

Support and Resistance for Cotton #2 lies at 69.08 cents and 71.08 cents, respectively.

(Commodities Control Bureau)

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