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ICE Cotton Scales Over 8-Month Peak Ahead Of Sino-U.S. Trade Deal

14 Jan 2020 8:12 am
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Mumbai (Commodities Control) – ICE cotton futures rose on Monday, hitting a more than eight-month high, supported by optimism ahead of the signing of a Phase 1 U.S.-China trade deal.

ICE Cotton contracts for March settled up 22 points to 71.53 cents per lb. The March contracts rose to 71.96 cents earlier in the session, the level last seen on May 9. While, May 20 cotton closed up 21 points at 72.67 cents. July 20 cotton ended at 73.63 cents, up 21 points.

The Cotlook A index was increased 70 points to 79.20 for 01/10. The AWP for cotton is at 60.08 cents/lb.

USDA left most of the balance sheet unchanged for the US, save for the acreage/yield revisions, which lowered production by 110,000 bales. The USDA did raise the cash average price 2 cents to 63 cents/lb. On the world side, USDA cut Chinese imports by 500,000 bales to 8.5 million bales.

Meanwhile, the trade is now laser focused on the U.S.-China signing treaty this Wednesday in Washington. Supposedly, the Chinese delegation has departed Beijing for the event. With that expectation, the market is experiencing two-sided emotions. The trade agreement marks the first step towards ending an 18-month long trade dispute between the world's two largest economies, which resulted in cotton falling more than 4% in 2019.

Traders closely monitored winter storms in the United States that dumped snow, freezing rain and hail from Texas to Michigan.

The market was perplexed over Friday’s supply-demand numbers. Traders were expecting a substantial reduction in the 2019 crop, but that expectation did not materialize. Instead, the government dramatically slashed harvest acres by 800,000, while also increasing the national yield per acre to compensate. Thus, the 2019 crop came down only 100,000 bales.

Total futures market volume fell by 21,046 to 25,362 lots. Data showed total open interest gained 4,671 to 245,037 contracts in the previous session.

Certificated cotton stocks deliverable as of Jan.8 totaled 6,824 480-lb bales, down from 8,890 in the previous session.

Support and resistance for Cotton #2 lies at 70.78 cents and 72.34 cents, respectively.

(Commodities Control Bureau)

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