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ICE Cotton Ends Higher Tracking Equities; Buoyed By Stimulus Package

26 Mar 2020 8:26 am
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Mumbai (Commodities Control) – ICE cotton futures settles higher on Wednesday as the market drew optimism from hopes of a $2 trillion rescue package to counter the strain on economy from the coronavirus pandemic.

Dow Jones had intraday gains of 1,300 points, but ultimately closed only 495.64 points higher.

Cotton contracts for May ended 55 cents higher to 53.54 cents per lb. It traded within a range of 52.22 and 54.28 cents a lb. July Cotton closed at 53.53 cents, up 52 points. October Cotton settled at 55.19 cents, up 49 points and December Cotton closed at 55.04 cents, up 39 points.

"The market is mostly following the broader stock markets again," said Bailey Thomen, cotton risk management associate with INTL FCStone, adding, "the pending $2 trillion deal out of Washington is what everyone is waiting for."

U.S. senators will vote on a $2 trillion bipartisan package of legislation to alleviate the devastating economic impact of the coronavirus pandemic, hoping it will become law quickly.

Hopes that the U.S. fiscal stimulus will ease the economic devastation caused by virus lockdowns lifted world equity indexes for a second day.

At least 19,598 people have died and 435,470 have been infected worldwide and with several countries under lockdown, global economic activities have come to a halt, spurring fears of the slowdown that might linger on even after the virus is gone.

Cotton market is going to be range bound in the low-to-mid 50s until it has more visibility on how the balance sheet looks like, said Peter Egli, director of risk management at British merchant Plexus Cotton.

Traders now await the weekly export sales report from the U.S. Department of Agriculture due on Thursday.

"Most people are expecting export sales to be lower this week based on the slowdown in global shipping and decrease in demand for cotton," Thomen added.

Meanwhile, trader expectations ahead of USDA’s Planting Intentions report suggest 2020 US cotton acreage could be 12.4 million acres. If estimates are realized, that would be a 9.5% drop YoY.

Certificated cotton stocks deliverable as of March 24 totaled 28,446 480-lb bales, down from 40,817 in the previous session.

Market experts are of the view, as markets move towards month’s end on March 31, it will also be the end of the quarter. Speculators tend to adjust their trading positions. Given how net short stand, a short-covering move could be in the works into the deadline.

Support and Resistance for cotton#2 lies at 51.25 cents and 55.37 cents/lb, respectively.

(Commodities Control Bureau)

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