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ICE Cotton Settles with Triple Digit Losses on Demand Concerns, Weaker Equities

4 Mar 2021 6:06 am
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Mumbai (Commodities Control) – ICE cotton futures fell more than 2% on Wednesday, tracking weakness in broader financial markets and as analysts said that the U.S. fiber was facing headwinds from cheaper Indian and African exports.

Cotton contracts for May 21 closed at 88.45 Cents, down 254 points, July settled at 89.41 cents, down 251 points and Dec 21 Cotton closed at 85.01 cents, down 144 points.The active- contract rallied to over 2-1/2-year highs last week but has slipped as much as 7.5% from that peak.

"The market has room to move a bit lower because the rally (has) ran into major resistance on the demand side," said Ed Jernigan, chief executive of Jernigan Global, a cotton textile supply chain manager.

Jernigan added that the rally also likely pushed Indian cotton stocks back into the market, weighing further on prices.

Market participants look forward to a weekly export sales report from the U.S. Department of Agriculture (USDA) due on Thursday. The market is clearly hoping for those numbers to be friendly. That report will be followed by Friday’s unemployment data from the Labor Department.

Trading advisors note that the cotton market lacks a positive trigger to push it higher and that is pushing some traders out of the market.

A dip in Wall Street's major stock averages and similar moves across grain markets like soybean, corn and wheat further pressured the natural fiber.

Having said so, there are a host of bullish factors working towards cotton and a lot of it has to do with South American weather. The same thing that keeps on buoying the grains is expected to keep cotton afloat too.

Rain delays to Brazil's harvest has fanned worries about tight short-term supplies of soybeans, leading prices of the oilseed to touch its highest since June 2014 last week.

Support and resistance for Cotton #2 lies at 87.36 cents and 90.33 cents per lb respectively.

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