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ICE Cotton Futures Decline Amid Favorable Planting Conditions and Economic Pressures

15 May 2024 8:45 am
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Mumbai, 15 May (Commoditiescontrol): Cotton futures on the Intercontinental Exchange (ICE) took a hit, dropping over 3% to reach the lowest point in nearly two weeks on Tuesday. The decline came amid improved weather conditions and positive progress in cotton planting, which eased some concerns about supply shortages.

July cotton contracts saw a significant reduction, closing 300 points down at 74.63 cents per lb. October contracts also fell, decreasing by 148 points to settle at 75.58 cents, while March contracts ended the day 142 points weaker at 75.70 cents.

The broader market was affected, with July contracts hitting the limit down of 3 cents, prompting an expansion of limits to 4 cents for Wednesday's session. Contributing to the downward pressure, crude oil prices also fell by $0.72, influenced by U.S. data indicating persistent inflation and OPEC’s decision to maintain its demand forecast. Higher oil prices typically raise the cost of cotton-substitute polyester, thus impacting cotton demand.

From a cultivation perspective, the latest Crop Progress report noted that cotton planting in Texas is on par with the average at 28% complete, and Georgia is progressing well, 3% ahead of the average at 35%. However, forecasts predict a slowdown in planting across a broad area of the Southeast, including eastern portions of the Texas panhandle due to expected precipitation.

Globally, the USDA’s World Agricultural Outlook Board (WAOB) adjusted its carryout estimates for the 23/24 cotton season downwards by 2.6 million bales to 80.48 million, citing a smaller carry-in. However, it projected an increase in the 24/25 ending stocks by 2.53 million bales to 83.01 million.

Trade dynamics also showed a robust demand for U.S. cotton, with USDA's latest weekly export sales report indicating net sales of 253,700 running bales for the 2023/2024 season. Despite this, China’s agriculture ministry anticipates an annual decline in imports of key commodities including cotton for the upcoming 2024/25 crop year.

In market specifics, ICE certified cotton stocks were reported down by 1,046 bales on May 13, totaling 165,265 bales. Additionally, the Cotlook A Index fell another 120 points to 85.20 cents/lb.

As traders and analysts monitor these developments closely, technical support for the July cotton contract for Wednesday is anticipated at 73.54 and 72.44 cents, with resistance levels expected at 76.82 and 79.00 cents.

(By Commoditiescontrol Bureau: 09820130172)

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