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ICE Cotton Ends Double Digit Lower On Corona Virus Jitters; First Weekly Gains In Four

8 Feb 2020 8:28 am
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Mumbai (Commodities Control) – Cotton futures edged lower on Friday weighed by investors concern over the extent of coronavirus' economic impact; however prices marked their first weekly gain in four.

The cotton market suffered a sharp spill early in Friday’s session as traders, fearing the uncertainty of the weekend, liquidated. To that end, the market remains dominated by the Wuhan virus news, despite last week’s record cotton sales and this week’s record cotton shipments, plus a strong job data report.

Cotton futures fell 16 to 26 points on Friday with March futures the firmest. March futures closed 29 points higher than last Friday.

March cotton settled down 16 points at 67.75 cents per lb. Prices were up 0.4% for the week. It traded within a range of 67.1 and 68 cents a lb. May Cotton closed at 68.14, down 34 points. July Cotton ended at 69.02, down 29 points. December Cotton settled at 68.86, down 26 points.

"I fear that mill use will slip in China as a consequence of coronavirus lockdowns, though other markets may pick up the slack somewhat," said Peter Egli, director of risk management at British merchant Plexus Cotton, adding that cotton is likely to be in a 66-70 cents trading range.

China has sealed off cities, canceled flights and closed factories to limit an epidemic roiling the world's second biggest economy to the alarm of global markets and businesses dependent on Chinese supply lines.

Also weighing on the cotton prices was a firmer dollar which climbed to a four-month high versus a basket of major currencies.

A stronger greenback makes commodities priced in dollars, such as cotton, expensive for holders of other currencies.

"Cotton is holding pretty much to a range, so we are seeing a little bit of speculator liquidation," said Jack Scoville, vice president at Chicago-based Price Futures Group.

Total futures market volume rose by 9,400 to 62,820 lots. Data showed total open interest gained 5,577 to 253,015 contracts in the previous session.

Going forward, next week on Monday the market will see if Friday’s option expiration for the March contract resulted in any dynamic changes to open interest. Of late, open interest has been coming off as the prices declined, but still the overall number remains huge. Then on Tuesday, USDA will release its February Crop Report.

Some participants are expecting that data to show reduced 2019 production, with possibly lower ending stocks. Thursday will have another round of exports-sales, and supposedly Saturday next week the NCC convention ends with the publication of their membership survey for 2020 acres. So, there remains a ton of data and time for the cotton market to consider.

Support and Resistance for Cotton #2 lies at 66.72 cents and 68.52 cents/lb, respectively.

(Commodities Control Bureau)

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