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ICE cotton futures fall on firm dollar, lower crude oil prices; Posts worst month since Dec 2022

1 May 2024 9:29 am
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Mumbai, 1 May (Commoditiescontrol): ICE cotton futures ended sharply lower on Tuesday, hitting sixm month low, as firm dollar and slide in crude oil prices dented investor sentiment. Further, the natural fiber recorded its worst month since December 2022 due to the sluggish demand view.

Adding to the downbeat sentiment, Wall Street's main indexes fell with caution prevailing ahead of the Federal Reserve's interest-rate decision and as stronger-than-expected labor costs hinted at persistent inflation..

ICE Cotton contracts for May closed at 77.92 cents, 210 points lower. Jul settled at 78.43 cents, losing 309 points. Dec ended 142 point weak at 76.83 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 and firm dollar. The dollar rose 0.4% against its rivals, making cotton more expensive for other currency holders. Oil prices edged lower, on the back of rising U.S. crude production as well as hopes of an Israel-Hamas ceasefire. Lower oil prices make cotton-substitute polyester less expensive.

Last week, the U.S. Department of Agriculture's (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.

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 Georiga 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 down 937 bales on April 29 at 182,659 bales. The Cotlook A Index was down 5 points on April 29 at 87.75 cents/lb. The AWP dropped another 85 points to 61.33 last Thursday and is in effect through this Thursday.

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 Wednesday, support for the Jul Cotton contract is at 77.20 cents and 75.98 cents, with resistance at 80.48 cents and 82.54 cents.

(By Commoditiescontrol Bureau: 09820130172)

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