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ICE Cotton Settles Weak on Month-End Square Off, Weakness in Grains, Equities; Posts Ninth Straight Monthly Gain

27 Feb 2021 8:25 am
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Mumbai (Commodities Control) – ICE cotton futures slipped on Friday as a dip in equity and grain markets spilled over to the natural fiber, but hopes for stronger demand and tighter supplies helped post ninth straight monthly gain.

The cotton market finished the day moderately lower after its massive limit-down melt Thursday.

Technically, the market was in grave overbought territory given it had just traded a 2 and 1/2 year high.

ICE cotton contract for May closed at 88.83 cents, down 86 points, July settled at 89.71 cents, down 66 points and December cotton ended at 84.33 cents, down 45 points. May Cotton ended down 165 points for the week, up 699 points for the month and up 1013 points for the year.

Prices dropped 4.3% on Thursday and retreated 6.9% from an over 2-1/2 year peak of 95.60 cents hit on Thursday.

Weighing on sentiment, Wall Street's main indexes extended losses as fears of a potential rise in inflation kept U.S. bond yields around one-year highs.

U.S. grain markets too dropped with wheat futures sliding 2.2%, further pressuring cotton prices. Corn and soybean futures also weakened.

A weekly export sales report from the U.S. Department of Agriculture on Thursday showed net sales of 247,800 running bales (RB) for 2020/2021 with top buyer China picking up 59,500 RB of the total.

CFTC data as of 23rd February showed cotton spec traders were 3,886 contracts more net long to 72,454 contracts. That came via new buying and left managed money the most net long since 14th Augusts of 2018. For commercials, the increased Open Interest nearly balanced the new longs and shorts, as the net short only grew 458 contracts to 157,627.

Certificated cotton stocks deliverable as of Feb. 25 totaled 100,129 480-lb bales, down from 100,326 in the previous session.

Support and resistance for Cotton #2 lies at 87.53 and 89.88 cents per lb, respectively.

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