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ICE Cotton Touches 8-Month High On Trade Deal Optimism, WASDE Report

11 Jan 2020 8:08 am
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Mumbai (Commodities Control) – Cotton futures rose on Friday, supported by optimism surrounding the U.S.-China trade deal, while a reduction in U.S. and world production and ending stocks estimates in the latest monthly supply and demand report added to the upbeat sentiment.

The most active cotton contract on ICE Futures U.S., the front-month March contract, was up 62 points to settle at 71.31 cents per lb. Earlier in the session, prices rose to their highest since May 10 at 71.39 cents. May 20 Cotton closed 60 points higher at 72.46 cents, while July 20 Cotton ended at 73.42 cents, up 59 points.

With this March futures garnered a weekly gain of 2.09 cents.

"The U.S. Department of Agriculture did not cut U.S. crop as much it was anticipated, but they did cut world carry out. Overall, the report was neutral to slightly friendly," said Keith Brown, principal at cotton brokers Keith Brown and Co in Moultrie, Georgia.

The USDA in its monthly World Agricultural Supply and Demand Estimates (WASDE) report lowered U.S. production estimates for the 2019/20 crop year to 20.1 million bales vs 20.2 million bales predicted last month, citing a decline in Texas.

World ending stocks in 2019/20 are now forecast at 79.6 million bales, compared with last month's estimate of 80.3 million bales, while the outlook for U.S. ending stocks is now for 5.4 million bales compared with 5.5 million bales last month. World ending stock standing below the 80-million bale mark can be taken as a psychological positive by traders.

USDA’s Cotton Ginning’s Report showed that cotton ginned through Jan 1 were 17.484m RB that is 1.364 million RB more than 2017’s pace. The delayed Export Sales report from the USDA had cotton bookings for the week ending 2nd January at 157,473 RB. That was a 50.67% decrease vs. the same week last year.

On the trade front, White House economic adviser Larry Kudlow told Fox Business Network that the U.S.-China trade deal is on track to be signed on Jan. 15. So next week, all eyes will be on Washington, D.C.

China said it expects higher cotton imports for 2019/20 on prospects of a Sino-U.S. trade deal.

It is a definite positive that the world’s top two economies have come to trading terms to some degree.

Cotton, from its December low, has rallied about 10%, and from its August harvest low, prices have risen about 25%.

Total futures market volume fell by 5,605 to 33,377 lots. Data showed total open interest gained 4,500 to 240,366 contracts in the previous session.

Certificated cotton stocks deliverable as of Jan. 8 totaled 8,890 480-lb bales, down from 8,970 in the previous session.

Support and resistance for the active contract lies at 69.98 cents and 72.06 cents, respectively.

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