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ICE cotton futures extend drops on weak exports, long liquidation

3 May 2024 8:45 am
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Mumbai, 3 May (Commoditiescontrol): ICE cotton futures declined further on Thursday, hitting 18 month low, pressured by long liquidation and weak exports sales report from the U.S. Department of Agriculture (USDA). There seem no respite to weak demand even as the natural fibre prices have softened below key levels.

ICE Cotton contracts for May closed at 74.92 cents, 89 points lower. Jul settled at 75.62 cents, losing 89 points. Dec ended 99 point weak at 74.18 cents. Price limits are back to 3 cents due to nearby futures getting back to the 70 cent level.

Cotton futures collapse was largerly caused by the slide in crude oil prices.

Crude oil prices fell towards seven-week low after the U.S. jobs data further dimmed prospects of an early decline in interest rates. Lower oil prices make cotton-substitute polyester less expensive.

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.

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 up 3,007 bales on the first of May at 186,121 bales. The Cotlook A Index was back down 300 points on May 1 at 85.30 cents/lb. The AWP dropped another 78 points to 60.55 last Thursday and will be updated later today. The Seam reported 2,299 bales of cotton sold on Wednesday at an average price of 67.85 cents/lb.

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 Friday, support for the Jul Cotton contract is at 74.54 cents and 73.45 cents, with resistance at 77.42 cents and 79.21 cents.

(By Commoditiescontrol Bureau: 09820130172)

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