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ICE Cotton Posts Best Week in Over a month On Vaccine – Led Demand Hopes

21 Nov 2020 9:03 am
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Mumbai (Commodities Control) – Cotton rose to a more than three-week high on Friday and was headed for its biggest weekly gain in five, as Pfizer's move to get authorization for its COVID-19 vaccine lifted hopes for an economic recovery and rebound in demand.

Bullish drivers also included the on-going technical trend, the net-long specs position, The spot December fading away, bringing the March contract to the forefront suggests the cotton market is beginning to transition away from “supply futures”, such as October and December, to the “demand futures,” or March, May, and July.

The cotton contract for Mar 21 Cotton is at 72.96 cents, up 129 points. December 20 Cotton is at 70.88 cents, up 156 points. May 21 Cotton is at 73.79 cents, up 122 points and July 21 Cotton is at 74.4 cents, up 113 points.

For the week, December contracts gained 3.53% and March contracts gained 3.64% or 256 points, up 312 points for the month, and 216 points for the year.

"There is some relief due to the fact that Pfizer and BioNTech will be filing paperwork today to be able to mass produce their vaccine for COVID," said Jack Scoville, vice president at Chicago-based Price Futures Group.

Pfizer Inc said it will apply to U.S. health regulators on Friday for emergency use authorization (EUA) of its COVID-19 vaccine, which is 95% effective, and expects the U.S. FDA to grant the EUA by mid-December.

"Sooner than later we'll be inoculating some people and that's a good thing and promises a better economic activity, combined with the fact that we have a shorter crop due to damage in the southeast from recent hurricane activity," Scoville added.

Cotton fell to multi-year lows in April, after virus-induced restrictions weighed on economic activity and apparel demand, but was propped up later in the year by crop damage worries from Hurricanes Sally and Delta.

Total futures market volume fell by 4,008 to 19,305 lots. Certificated cotton stocks deliverable as of Nov. 19 totaled 118,394 480-lb bales, up from 118,304 in the previous session.

The Commitment of Traders report from CFTC showed a 1,529 contract reduction to managed money’s net long position. Cotton speculators were still 57,565 contracts net long on 17th November after the long liquidation. Open Interest for commercials dropped 11% on the week to a 7 week low 200,590. That reduced the commercial net short 1,014 contracts on the week to 140,428.

Next week, the cotton market will see crop harvest progress on Monday. The market will be closed on Thursday in observance of Thanksgiving Day, which will delay weekly exports and sales to Friday.

Support and Resistance for Cotton #2 lies at 72.06 cents and 73,45 cents per lb, respectively.

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