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ICE cotton futures rebound on bargain buying, financial markets extend support

8 May 2024 8:48 am
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Mumbai, 8 May (Commoditiescontrol): ICE cotton futures rebounded on Tuesday, helped by a technical correction, while gains in the wider financial markets also extended support to the natural fiber. A 1.3% fall in cotton prices in the previous session triggered technical buying while the U.S. stock indexes rose, extending their recent run on expectations that the Federal Reserve will cut interest rates this year.

ICE Cotton contracts for May closed at 77.00 cents, 44 points higher. Jul settled at 77.50 cents, adding 44 points. Dec ended 44 point strong at 75.75 cents. Price limits are back to 3 cents due to nearby futures getting back to the 70 cent level. The US dollar index was up 341 points, a negative input, while crude oil was 22 cents lower.

Cotton futures closed out last week on a better note for the bull. However, July was down 284 points or 3.51% for the week, with December 134 points lower.

The US cotton crop was reported at 24% planted as of Sunday, a 9% advance over the last week. The 5 year average planting pace for the crop is 20% complete by May 5, according to USDA/NASS. Of the major cotton acreage states, Texas was 3% faster than normal at 24%, with Georgia 4% ahead at 21%.

USDA's weekly export sales report showed net sales of 97,400 running bales (RB) for 2023/2024, down 45% from the previous week and down 20% from the prior four-week average. The report also showed exports of 180,000 RB, down 31% from the previous week and down 39% from the prior four-week average.

Monthly export data from Census showed 1.63 million bales of cotton (excluding linters) shipped during March. That was a 3.63% increase over the same month last year, and the largest since June 2022.

Last week, the 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.

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 down 1,320 on May 6 at 184,790 bales. The Cotlook A Index was down 30 points on May 3 at 83.25 cents/lb. The AWP dropped another 78 points to 60.55.

Commitment of Traders data shows managed money in cotton futures and options flipping to a new net short position during the week that ended on April 30 to -1,934 contracts that was a bear move of 11,435 contracts on the week the ended on Tuesday.

For Wednesday, support for the Jul Cotton contract is at 76.65 cents and 75.79 cents, with resistance at 78.46 cents and 79.41 cents.

Investors' focus this week is set on the USDA monthly WASDE report due on Friday.

(By Commoditiescontrol Bureau: 09820130172)

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