Mumbai, 2 May (Commoditiescontrol): ICE cotton futures eased on Wednesday, dropping to 18 month low, pressured by long liquidation and lacklustre demand, as downbeat sentiment in oil and wider financial markets also weighed.
ICE Cotton contracts for May closed at 75.80 cents, 211 points lower. Jul settled at 76.51 cents, losing 192 points. Dec ended 166 point weak at 75.17 cents. Price limits are back to 3 cents due to nearby futures getting back to the 70 cent level.
Cotton futures collapse was largely caused by the slide in crude oil prices, falling nearly 2% to a seven-week low, on a surprise build in U.S. crude stocks, the prospect of a Middle East ceasefire agreement and persistent U.S. inflation dampening the expected pace of interest rate cuts and oil demand growth. Lower oil prices make cotton-substitute polyester less expensive.
The US dollar index fell 560 points on the day after the release of Fed policy.
Traders now await today's U.S. Department of Agriculture (USDA) weekly export sales report for more clarity on demand.
Last Thursday, the USDA weekly export sales report showed net sales of 177,100 running bales for 2023/2024, up 21% from the previous week and 73% from the prior four-week average.
The report also showed exports of 261,700 running bales, down 2% from the previous week and 18% from the prior four-week average.
USDA’s Cotton Systems report showed 758 RB cotton consumed by US mills in March, up 48.6% from last year but 25.9% below the Feb use total. Stocks were at 1,307 RB, the lowest for March going back 2015.
On planting front, weekly Crop Progress data indicated cotton planting pace in the major states moving along, at Texas was 18% complete, even with normal, and Georgia was 1% above the 5-year average pace at 10%.
According to the World Agricultural Supply and Demand Estimates (WASDE) report on Thursday, world trade for 2023/24 was projected 700,000 bales higher this month to nearly 44 million.
USDA left the US cotton balance sheet alone this month, as they wait for final production data next month. Stocks are still at 2.5 million bales, though the US average farm price was trimmed by a penny to 76 cents. The World cotton S&D table was a 0.26 million bale cut to stocks at 83.08 million bales, mainly on tighter carryover from the previous crop year.
World trade for 2023/24 was projected 700,000 bales higher this month to nearly 44 million, as a 1.3-million-bale increase in China's imports was partially offset by reductions for Pakistan and Indonesia, as per the report.
Global ending stocks for 2023/24 were projected down nearly 300,000 bales in April as lower stocks across West Africa, Australia and Brazil more than offset higher supplies in China, the report added.
ICE certified cotton stocks were up 555 bales on April 30 at 183,114 bales. The Cotlook A Index was up 55 points on April 30 at 88.30 cents/lb. The AWP dropped another 85 points to 61.33 last Thursday and is in effect through tomorrow.
Commitment of Traders data confirmed a continuing exodus of the managed money spec longs in cotton futures and options during the week that ended on April 23. They exited 10,779 longs during the week, while their compatriots added 15,862 new shorts. The spec fund net long on Tuesday night had declined to 9.501 contracts.
For Thursday, support for the Jul Cotton contract is at 75.53 cents and 74.56 cents, with resistance at 78.00 cents and 79.50 cents.
(By Commoditiescontrol Bureau: 09820130172)
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