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ICE Cotton Steadies Below 18 – Month Peak on Harvest Pressure

28 Oct 2020 7:58 am
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Mumbai (Commodities Control) – ICE cotton futures rose to their highest in about 1-1/2 year earlier on Tuesday, supported by adverse weather conditions in the top growing regions, but prices pared some gains as the harvest season progresses.

The cotton contract for December closed at 72.03 cents, down 8 points. Prices of the front-month contract hit their highest since May 7, 2019 at 72.53 cents earlier.

March 21 Cotton closed at 72.73 cents, up 1 point. May 21 Cotton closed at 73.28 cents, up 6 points and July 21 Cotton closed at 73.65 cents, up 7 points.

"The U.S. crop continues to get smaller. The weather's less than perfect and demand is pretty steady so that's creating a bullish environment," said Jordan Lea, senior trader at DECA Global.

But "lots of producers are selling, because they are harvesting and merchants are buying the physical cotton and selling the futures to hedge their purchases," he added.

Snow, sleet, and freezing rain are expected across the west Texas region, the National Weather Service said.

Market participants are also keeping a close eye on the track of Tropical Storm Zeta, which is expected to regain hurricane strength and move inland across the southeastern U.S. early Thursday.

The U.S. Department of Agriculture's weekly crop progress data on Monday showed that 42% of cotton was harvested as of the week ended Oct. 25 and 40% of cotton was in good/excellent condition.

"The market is technically quite 'overbought' so I wouldn't be surprised to see a pullback. The U.S. elections in a week from today could prompt some profit-taking, as well," said Peter Egli, director of risk management at British merchant Plexus Cotton.

Demand has improved, "but with the COVID crisis persisting, economic pain is likely to increase and this could weigh on demand after the holiday season," Egli added.

The market is anticipating Thursday’s export sales report. Given the dollar has been on the ropes, traders continue to expect strong sales going forward. Last week sales were 227,000 bales.

Certificated cotton stocks deliverable as of Oct. 26 totaled 38,888 480-lb bales, up from 36,963 in the previous session.

Support and Resistance for Cotton #2 lies at 71.34 cents and 72.88 cents per lb, respectively.

(Commodities Control Bureau)



       
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