Mumbai, 21 Mar (Commoditiescontrol): ICE cotton futures ended lower on Wednesday, falling to near one-month low, as rally in dollar and downbeat sentiment across oil and equity markets applied pressure.
The dollar index hit its highest in over two weeks, up about 0.4%, making the natural fibre more expensive for buyers overseas. Lower oil prices make polyester, a cotton substitute, less expensive.
ICE Cotton contracts for May closed at 92.18 cents, 116 points lower. Jul settled at 92.12 cents, losing 100 points. Dec ended 20 point weak at 83.80 cents.
Cotton marched lower during the session, but closed "40 points off the daily low with triple digit old crop losses. New crop futures were down by 17 to 20 points. For the week, the May contract recorded a net 134 point loss or 1.40%. Dec cotton finished the week with a net 69 point gain or 0.92%.
The United State Department of Agriculture (USDA) Weekly Export Sales data had 85,845 RBs of cotton booked for the week that ended Mar 7. That was up 65% for the week, but marked the 3rd consecutive sub-100,000 RBs week. Shipments were listed at 292,282 RBs for a running total of 5.97 million. Shipments at the same time last year were 5.95 million RBs. Commitments remain 2.3% behind last year’s pace compared to the WASDE forecasting 3.7% year on year export decline.
Last Friday, USDA came out with the market friendly info. The federal agency surprisingly cut the cotton yield by another 23 lbs per acre to 822. That lowered production and tightened stocks with no other change to use. Cotton stocks are now projected at the tightest since 12/13 at 2.5 million lbs. Stocks/Use is still just a 2-year low.
On Thursday, FAS reported 52,000 RBs of cotton was sold for export during the week that ended Feb 29. That was up from the MY low last week but still 100,000 RBs shy of the 4-wk average. The week’s exports were listed at 331,000 RBs.
There is expectation for better demand, especially from India and China and the demand will impact the ending stocks even more, dealers said. Yet, stifled demand due to high cotton prices above 90 cents, makes it difficult for mills to buy, which is pressurising the market. A slight decrease in supply and demand is expected in the near term, with prices likely to remain volatile but will hold between 90-96 cents.
The USDA World Agricultural Supply and Demand Estimates (WASDE) report on Friday noted that 2023/24 U.S. cotton forecasts show lower production and ending stocks relative to last month. The report also showed global cotton consumption is almost 500,000 bales higher with gains for China and India. The U.S. Department of Agriculture (USDA) will release the planting intentions report on March 28.
Meanwhile, a U.S. weather forecaster on Thursday projected El Nino conditions will likely end by spring this year but saw a 62% chance that a weather pattern characterized by unusually cold temperatures in the Pacific Ocean, La Nina, will develop during June-August.
Elsewhere, the Australian agriculture ministry raised its estimate for the country's 2023/24 cotton production. It estimated cotton production at 1 million tons versus previous forecast of 925,000 tons.
The Cotlook A Index was 5 points weaker to 98.40 cents/lb. USDA’s weekly Cotton Market Review showed 11,320 bales were sold at an average price of 89.25 cents/lb. The updated AWP is 76.10 cents/lb for the week through Thursday. ICE certified stocks added another 1,100 bales to 27,765 as of Mar 13.
This week’s Commitment of Traders report revealed managed money spec funds trimming 3,201 contracts from their net long in cotton futures and options. They took that net position to 93,160 contracts as of Tuesday March 12.
The market now awaits U.S. Department of Agriculture's (USDA) weekly export sales report due later today.
For Thursday, support for the May Cotton contract is at 91.50 cents and 90.83 cents, with resistance at 93.16 cents and 94.15 cents.
(By Commoditiescontrol Bureau: 09820130172)
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